Q3 2008
The ATS Network & Billing Update is published by Advanced Technologies & Services, Inc. (www.atso.com), a revenue and service assurance solutions provider. This free newsletter is a guide to telecommunications OSS, billing, and revenue assurance news and other telecom industry analysis. To unsubscribe, contribute an article, or for offbeat news, please scroll to the end. Feel free to forward this newsletter to your friends and co-workers!
In this issue:
The Credit Crisis' Impact
on the Telecom Market
By: Peter
Mueller, COO, ATS
What impact will the credit crisis have on the telecom market? It’s hard to imagine a more relevant question, so I’ll try a few predictions here:
-
CapEx to Slow, Especially for Network Build Outs
It’s hard to imagine new technologies (such as a large Fiber or Wireless buildout), getting the green light these days – especially if they needed any kind of help from the commercial credit markets. -
Cash is King, so Watch the ILECs Hoard it
Today, their stocks trade at about 2x cash flow, compared with the markets’ 12x. That means, in short, they spill off a lot more cash relative to their valuations. However, they also have more debt as the following chart shows. “Quick Ratio” is short-term-assets/short-term-debt, so all of these companies, having ratios less than 1, are users of commercial-lines-of-credit. So, when we hear that the credit markets are ‘seizing up’, we have some reason to worry. Since all of the big players have Quick Ratios that are less than one, they’ll all be more worried about refinancing their debt.
| Company | Quick Ratio | Debt |
| Qwest (Q) | 0.8 | $13B |
| Verizon (VZ) | 0.6 | $34B |
| AT&T (T) | 0.5 | $64B |
-
Access Line Losses Will be a Surprise
But maybe not what we’ve come to expect. We know from past downturns that Telecom spending is pretty inelastic – i.e, people give up a lot before they turn off their phone service. But, we’ve never been through a downturn when so many people have had so many ways to make a call. If “Joe Consumer” wants to cut out spending, which will be the first to go: The Landline, the Wireless Phone, the Cable or the Broadband? And which will be the last? The results, I think, will surprise us, and the trusty-old-POTS-lines might do well in this downturn. -
Consolidation Likely Not Over
Our industry’s definitely been under consolidation for some time. And, each time we think “this has to be it”, another announcement gets made. But the credit crisis could mean still more… After all, if merging any two companies would lower the cost of credit, you can bet that someone on Wall Street is already pitching the deal. However… -
There is no more “L” in LBO
The term “Leveraged Buy Out” refers to using borrowed money to make a purchase – not unlike what most people do when they buy a house with a mortgage. Earlier this year, the friendly takeover of Bell Canada (BCE) represented the largest LBO ever at a price tag of $35 Billion, most of which was with bank-borrowed (i.e. ‘leveraged’) money. It’s almost inconceivable that same type of deal could be repeated today.
So where do these admittedly-macro trends leave those of us plodding away in Revenue Assurance? I actually think this breathes new life and urgency into our world. Here’s why:
Warren Buffett, in reference to the bailout package, said that “nobody can borrow money as cheaply as the Fed” and that, by extension, only they could ‘lever up’ and take risky assets off of Wall Street’s balance sheets. That got me thinking about the telecom community, and how cheaply it can raise money. When you think about it (and with all due respect to Mr. Buffett!) there is no cheaper source of revenue/equity/cash than that single dollar found via Revenue Assurance efforts. Those dollars fall (pretty much) straight to the bottom line – and become immediately (and sometimes on a recurring basis) available for other sources, including for – you guessed it –debt reduction. If the credit crisis extends for any length of time, or even if interest rates merely rise a little, then the era of cheap and plentiful credit will be over, and carriers needing to refinance their debt will look for ever-cheaper sources of cash. So, whereas RA was once seen as merely enhancing profitability, it will soon be seen as a viable source of funds for retiring debt.
That might be the best thing to ever happen to Revenue Assurance.
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Customer Billing Satisfaction Linked to Churn
Courtesy of
B/OSS
Customer satisfaction with telecom billing systems, especially for mobile services, is a key to customer loss rates, according to the results of the latest TM Forum Business Benchmarking study, released this week at Management World 2008 World in Nice, France.
The telco benchmarking data show a large gap between the top and average billing inquiry rates among service providers. Average performers logged 16.21 percent of inquiries as billing-related while leading companies reported billing inquiries at 1 percent of all inquiries. Significantly, good performers in this area show lower customer loss rates with less effective performers showing high loss rates.
Click Here for the full story.
Note: ATS has recently been engaged with a few clients on an initiative called MarketWatchTM. MarketWatch is system that analyzes customer data and predicts customers at higher risk of churn and the revenue at risk. For more information about MarketWatch, contact Ryan Guthrie at ryanguthrie@atso.com.
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TM Forum IDs Real Revenue Loss Data
Courtesy of
B/OSS
Service providers will never recover one-half of one percent of their lost revenue, but if the other half of a percent is significant, which it usually is, they may want to shore up the integrity of their revenue streams.
The TM Forum has concluded a new Revenue Assurance Benchmark Study that it says provides “tangible proof” that service providers incur an average of one-percent revenue leakage with a maximum recovery of 50 percent.
Fourteen service providers across five continents participated in this benchmark study. The forum said the numbers can only get more precise as more providers join the study, which looks at revenue losses caused by convergence and a lack of visibility across the value chain, among other causes.
“This study demonstrates how important managing the integrity of revenue streams is to service providers," said Martin Creaner, president and chief technology office at the TM Forum. "If you can’t measure it, you can’t manage it. And this report is a breakthrough in the measurement of actual revenue leakage. Every service provider needs to be aware of this and join into the next round of measurement.”
Tonia Graham, program manager for the TM Forum Business Benchmarking Program, said of the surprising results: "For multibillion dollar organizations, that adds up to substantial losses."
The study also identified that preventive measures were effective at lowering revenue leakage. Validating a large swatch of a service provider’s data records, for example, reduced leakage significantly.
Click Here for the full story.
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OffBeat
News:
25th Anniversary of the 1st Mobile Phone Call
Courtesy of
Cellular News
The US wireless industry trade body, the CTIA has noted that this month marks the 25th anniversary of the first commercial cellular call in the United States. The first commercial cellular call was placed on October 13, 1983 to the grandson of Alexander Graham Bell in Germany from the president of Ameritech Mobile Communications at a ceremony held outside of Soldier Field in Chicago, IL. This transatlantic conversation launched the nation's first citywide commercial cellular system.
Weighing nearly two pounds and 13 inches long, the Motorola DynaTAC 8000X used on that historic day had only 30 minutes of talk time, a far cry from the sleek, thin multi-purpose wireless handsets of today.
“Wireless technology is the printing press of the 21st century,” said Steve Largent, President and CEO, CTIA – The Wireless Association®. “What started as a simple call has transformed into a cultural phenomena of instant communication and broader and equal access to the world at our fingertips. From the ‘brick’ phone of the 80’s, to today’s 3G broadband world, wireless has evolved from mere voice communication to a new era of data transmission and democratizing communications that are transforming our commerce and culture along the way.”
Click Here for the full story.
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