Telecommunications

and Data Analytics

Improving nancial performance by turning
challenges into opportunities
2
The telecommunications industry has experienced
rapid changes over the past decade as a result of
technological advancements, regulatory inuences
and increased competition.
Companies have responded to these changes with
strategic acquisitions, multiple and complex pricing
plans, and product bundling. They have also sought
to offer differentiated products such as IPTV and
cloud computing. These changes in the market
present new challenges which could undermine
earnings and impact key industry performance
measures including EBITDA and Average Revenue
Per User (ARPU).
The telecommunications industry regularly uses
data analytics in elds such as customer analysis
and network optimisation. For nancial analyses such
as identifying risks, which could negatively impact
an entitys nancial performance, communications
service providers have traditionally used statistical
sampling techniques that cover only short time
periods and a limited subset of data.
To better understand and respond to these risks,
Chief Financial Ofcers (CFOs) can now use more
sophisticated data analytic methods to supplement
the audit advisory services they receive. In particular,
a cost-effective opportunity exists to analyse large
volumes of data over an extended period, providing
more insight and greater agility to respond.
In this article, we discuss ve areas in which data
analytics can be used to address the opportunities
and risks faced by communications service providers:
ARPU leakage, network development, protability
of stores and franchises, phone inventory and
cash outows.
CFOs can now use more
sophisticated data analytic
methods to identify revenue
opportunities and address risks
that negatively impact their
companys margin
Data analytics and improving nancial results
The following ve cases show that the combination of deep industry insights and data analytics offer
CFOs the unique ability to effectively address industry specic nancial risks and create opportunities
by analysing data over an extended period of time.
Time
Telecommunications and Data Analytics 3
CFOs can make the adjustments
they need to get ARPU back on
the path to growth
Telecommunications companies invest heavily
in capturing and analysing ARPU. In recent years,
the number of variables which contribute to ARPU
has increased alongside the complexity of product
offerings, bundling and billing arrangements.
As a result, CFOs may struggle to understand
why ARPU is changing and what they can
do to arrest downward trends.
Outperforming competitors requires a granular,
in-depth understanding of the factors that drive
changes in ARPU data analytics make this possible
at levels not previously achievable. Analytics can also
identify outliers that provide meaningful clues to
the sources of underages or overages. Armed with
this information, CFOs can make strategic pricing
decisions to get ARPU back on the path to growth.
Deloitte recently helped a leading Australian
telecommunications provider understand the
reasons behind changes in ARPU by analysing
how customers moved between certain price
plans. This exercise signicantly helped the
carrier optimise its strategic price setting.
1 ARPU leakage
identifying outliers

Price plan
A
R
P
U
Figure 1: ARPU analytics
4
2 Network development
project accounting and capital
expenditure tracking
As communications service providers invest
signicant time, effort and capital into optimising
and expanding their networks, tracking and
accounting for these projects is essential for CFOs
and internal auditors. CFOs need to decide which
aspects of network building exercises are booked
as expenses and which can be capitalised as
assets. Conducting data analytics on capital works
in progress can identify projects with unusual
characteristics that present increased risks
of capital loss.
By analysing variables such as actuals versus
budget, timing of spend, and cost composition
across all capital projects week to week and month
to month CFOs can create a risk prole for each
project. They can then pinpoint those projects which
need additional management attention to minimise
downside nancial exposure.
CFOs can pinpoint those projects
which need additional management
attention to minimise downside
fnancial exposure
Figure 2: Network development detailed project risk prole
Risk Score
P
r
o
j
e
c
t

t
u
r
n
o
v
e
r

(
Y
T
D
)

Projects that fall within the accepted turnover/risk ratio

Projects with increased risk that warrant further investigation
Telecommunications and Data Analytics 5
3 Proftability of stores
and franchisees
Many customers buy telecommunication services,
phones and related devices through company-owned
or franchised retail stores. Data analytics gives CFOs
the opportunity to measure the performance of each
store using more granular metrics than protability
alone. This extends to unobvious correlations not
historically visible.
For example, management can review the controls
and processes at stores that signicantly outperform
or underperform relative to their peers and potential
catchment. CFOs can ensure they are comparing like
for like, by taking into account factors such as the
particular demographics for each store location
along with store size and operating attributes.
This can provide valuable insights for future
planning. In addition, CFOs can identify the stores
at greatest risk of poor nancial performance
and take appropriate action.
Catchment spend on communication devices

High performing stores

Stores with operational improvement opportunities

Underperforming stores to consider for closure and / or relocation
S
t
o
r
e

c
o
n
t
r
i
b
u
t
i
o
n

t
o

n
e
t

m
a
r
g
i
n
CFOs can identify stores at
greatest risk of poor fnancial
performance and take
appropriate action
Figure 3: Store performance
6
4 Phone inventory
minimizing holding costs
Mainly as a result of the introduction of the smart
phone, phone inventory has signicantly increased
in value and now represents a substantial cost to
operators. As a consequence, adequate monitoring
of phone inventory levels has become important
in order to minimize holding costs and prevent the
organisation from unnecessary losses relating to
impairment of outdated phone inventory.
Traditional inventory management systems provide
high level insight into the aforementioned, however,
typically allow only a retrospective view on the
inventory challenge. CFOs can use data analytics to
perform an in-depth analysis of its existing phone
inventory, analyse product margins at the lowest level
and predict phone inventory with an increased risk
of becoming obsolete. This will help improve stock
replenishment, optimise phone inventory levels
and reduce costs relating to holding inventory.
CFOs can improve stock
replenishment, optimize phone
inventory levels and reduce costs
relating to holding inventory
Average number of days to sell
Figure 4: Optimising inventory levels
I
n
v
e
n
t
o
r
y

v
a
l
u
e

Communication devices above optimal inventory levels
7
5 Cash outfows
Communications service providers typically
experience signicant cash outows when
purchasing fixed assets such as network
components and communication devices.
This warrants increased scrutiny of a
telcos payments processing and control.
CFOs can use data analytics to validate
existing supplier databases and identify any
invalid or unused suppliers. They can also
verify that purchase authorisations comply
with internal authorisation rules, including
instances of duplicate payments (which occur
more frequently than many realise). As a
result, CFOs can gain insights into breaches
of purchase authorisation procedures and
take steps to reduce unnecessary loss.
Deloitte helped a prominent Australian
telecommunications carrier conduct an
in-depth analysis of the effectiveness of its
payments function. Several ideas to improve
processes and controls were implemented.
Conclusion
Given the massive number of transactions processed by telecommunications companies; and the
costs and complexity involved in their operations, data analytics offers CFOs a valuable opportunity
for enhancing the frameworks and procedures they adopt to drive protability and minimise
unnecessary downside risk.
CFOs can gain insights into
breaches of purchase authorisation
procedures and take steps to
reduce unnecessary loss
About Deloitte Australia
Deloittes next-generation advisory services combine deep telecommunication industry expertise with leading-edge nancial data analytics.
Our advisory professionals can draw on the expertise of more than 100 data analytics experts across Australia. We can help CFOs accurately
pinpoint the challenges and risks they face, correctly interpret the results of data analytics exercises and maximise the benets that result.
Please contact us for more information about this topic or the role data analytics could play in your organisation.
Please visit www.deloitte.com/au/tmtinsights for more Deloitte thought leadership on issues and opportunities in the
Telecommunications sector.
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AM_Syd_03/12_046770
About the authors
Philip Takken is a Director in Deloittes Technology,
Media and Telecommunications practice in Sydney.
In the last fourteen years Philip has been providing
Assurance and Advisory services to major
incumbents as well as emerging telecommunication
companies in both the USA and Asia Pacic.
Tel: +61 2 9322 3957
Email: phtakken@deloitte.com.au.
Slav Tabachnik is a Director in Deloittes Data
Analytics practice in Sydney. Slav has more than
twelve years experience developing computer models
to assist customer management, compliance, revenue
and cost management activities using electronic data
sets. Slav has applied these skills across a number of
engagements in the telecommunications industry
in Germany, Canada and Australia.
Tel: +61 2 9322 7345
Email: stabachnik@deloitte.com.au.