Increasing the precision of network CAPEX
In a recent analysis , Tele2 Sweden leads the pack with the best return on investment among the 45 operators analysed. The company is best practice when it comes to turning CAPEX to service revenue. We spoke with two executives in the company to better understand what is behind their success and the precision of investing at the right time and in the right places of the network.
There is no doubt that Tele2’s company culture is the cornerstone for the company’s success and healthy return on investment. According to Roshan Saldanha, CFO for Tele2 Sweden, “Our challenger spirit is the underlying factor for having this fantastic performance when it comes to investment. At the same time, we are able to offer a high quality customer experience in both the consumer and enterprise markets.”
Tele2 is also one the first companies in the world to set up a network sharing joint venture (JV). It has one of the first joint ventures with Telia on 3G, and another joint venture in 2G and 4G with Telenor  – also a future network partner in 5G . All the investments Tele2 make, in coverage and capacity, are split between the two operators. Sharing makes perfect sense in Sweden since it’s a large, but scarcely populated, country with just 22 inhabitants per square kilometre.
“When we started rolling out the new 4G network in 2010, we set a clear vision of reaching 99% population coverage in the country while also improving on the voice coverage of 2G – a milestone we reached in early 2013. Our current target is to reach an area coverage of 90%. Our initial focus was primarily on building coverage – a basic requirement for business customers but also consumers – but also on increasing capacity in areas where it was needed. Building a base area coverage is a necessity, so it makes great sense to have a joint venture where investments are shared”, explains Elin Ovesson, Head of Network at Tele2 Sweden, and continues, “Since we obtained the 800MHz licenses that included a coverage requirement, we invested 300 MSEK for building coverage in remote areas – a natural part of a bigger initiative to extend coverage in the country.”
Besides the cost efficiency, the joint venture also enabled a speedy rollout. “Because we are two different rollout organisations – we can jointly take the same amount of capacity and investment levels – so we can achieve better rollout speeds. We were the fastest to achieve the 4G rollout in highly populated areas”, explains Roshan.
Moreover, since Tele2 shares the spectrum in the JVs (not only radio equipment) it can use the frequencies in a more efficient way – compared to having two separate dedicated operator bands – since the resource is pooled. It also gives more flexibility in managing load variations. All this has a positive effect on CAPEX.
Tele2 also benefits from “Shared Operations” that has been in place for the past year and a half. This is done across the international footprint of the company. “This basically enables us to use the right competences and knowledge across our footprint. And since we now have a set up where specialists in Sweden support Croatia and other countries and vice versa, we can share an incredible amount of knowledge very effectively all over the Tele2 Group operations. This is maybe not explicit in the CAPEX – but the way we learn from each other makes us smarter in the way we handle our investments”, highlights Elin.
Roshan also identifies another key enabler for Tele2’s CAPEX efficiency, which is the use of predictive data models and analysis. The company has used predictive analytics and related tools for many years. “So when it comes to pointing out where we should invest, the decision has been made based on where the demand is. Our accuracy in predictive analytics is another core strength.”
Tele2 uses a vast set of KPIs that are followed closely, and each time the company is about to change its portfolio or introduce a new offering, it simulates the change in its network. “We have been doing this for a long time. But naturally the tools are changing and improving all the time”, says Roshan.
Elin highlights a recent example: “In 2015, when we launched bigger data buckets we saw a major difference before and after in traffic growth. It is not only old statistics that can point out what is happening tomorrow, you also have to take into consideration commercial activities and the changes to what you are offering to the market.”
Tele2’s horizon goes beyond a year when doing forecasting. The company aims to identify the exact spots where future growth will occur. “We use models to indicate where (in the network) it is likely we will have to invest at a certain point in time. These models are based on simulations and usage patterns”, clarifies Elin.
Roshan is also quick to point out that naturally the joint venture partners don’t have visibility of each other’s data and are making their own forecasts independently. This information is then aggregated in the joint venture organisation.
Before accurate forecasting can be done, a common set of targets has to be agreed. Elin and Roshan explain that in Tele2 the awareness of the numerous targets – financial, customer specific, network and quality targets – is particularly high across the whole organisation. “If we are all swimming in the same direction and use things like balanced scorecards, we can get there faster. Processes exist to align targets. When it comes to customer experience and network quality, there is also a lot of public information out there and this of course also impacts on customer loyalty. All of this is reflected in the target setting.”
Elin concludes, “We do link targets effectively in certain areas of our operations but there could be more. We have quite a road to walk still. We are not yet satisfied – but we’ve made a good start”.
Note to readers:
This interview was independently conducted by tefficient.
1. “How to increase CAPEX precision?“. Omnitele. 06 Feb 2017. Retrieved 20 Feb 2017.
2. “Tele2 and Telenor to build joint 4G network in Sweden“. Tele2.com. Retrieved 20 Feb 2017.
3. “Tele2 and Telenor to build a common 5G network“. Tele2.com. Retrieved 20 Feb 2017.