Incorporating risk analysis into telecom investment projects · 2004-10-29 · Incorporating risk...

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  • National and Kapodistrian UNIVERSITY OF ATHENS

    Incorporating risk analysis into telecom investment projects

    Dr. Dimitris VAROUTASLecturerUniversity of Athens Dept of Informatics & Telecommunications

    [email protected]

  • 2

    National and Kapodistrian UNIVERSITY OF ATHENS

    Agenda

    UoA in modeling telecom investmentsRisk analysis in telecom investmentsn The problemn The methodologiesn The tools

    Some examplesn Broadband access networksn 3G-WLAN business cases

    Conclusions & Discussion

  • 3

    National and Kapodistrian UNIVERSITY OF ATHENS

    UoA Technoeconomic activities

    Conduct technotechno--economic evaluationseconomic evaluations for telecommunication investment projects like:

    w Next generation mobile networks and servicesw Fibre access evolutionw Broadcast convergence

    Formulate pertinent recommendationsrecommendations to policymakers, network operators and service providers regarding communications investment strategies. DemandDemand modellingStudy the riskrisk and externalitiesexternalities effects in communicationsPromotion and disseminationdissemination of the results

  • 4

    National and Kapodistrian UNIVERSITY OF ATHENS

    Consolidation of results and guidelines for deployment scenarios

    Information gathering / exchange

    Common framework

    Network Studies

    Guidelines

    Standards, Research projectsand field trials

    Other Sources

    Commonconclusions

  • 5

    National and Kapodistrian UNIVERSITY OF ATHENS

    Steps in technoeconomic modelling

    Marketing Strategy Services

    Network Technology

    ComponentsCost

    MarkerShare

    Prices Revenues

  • 6

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk and uncertainty are the only certain factors

    Marketing Strategy Services

    Network Technology

    ComponentsCost

    MarkerShare

    Prices Revenues

    RISK RISK RISK RISK RISK

  • 7

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk in marketing strategy

    Lucrative segments of markets/areas/servicesSuitable models for the evaluation of the segmentsn Diffusion or choice based

    modelsn Market studies or expert

    reportsn Cross technology models n Cross country models

    Diffusion Rates

    0,00

    0,05

    0,10

    0,15

    0,20

    0,25

    1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

    Years

    Rat

    e

    Actual Gompertz I Gompertz II Linear Logistic

    Box-Cox FLOG TONIC

    E.g. Can we evaluate and forecast the number of innovators and imitators?

  • 8

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk in evaluating services

    Which are the profitable applications and servicesn Online or offline

    servicesn Determinants of

    telecom servicew Ratew Distancew Mobility

    Hedonic Price Index Evolution

    y = 0,0396x + 0,7633

    0

    0,2

    0,4

    0,6

    0,8

    1

    1,2

    98/97 99/98 00/99 01/00 02/01

    Years

    Hed

    on

    ic i

    nd

    ex

  • 9

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk in choosing the network technology

    Can we take lessons for existing technologiesNeed for risk analysis in new technologiesn xDSLn WLAN

    Fibrein the loop

    Digital Subscriber

    Line

    WirelessCellular Systems

    HybridFibreCoax

    SatelliteSystems

  • 10

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk in evaluating pricing concepts

    Appropriate pricing modelsEvaluation of price models in real or simulated situationsUnified price indicesn across technologiesn across servicesn across countries

    Need for new approaches in econometric modelsn Price elasticityn User behaviorn Externalitiesn Cross technology

    effects

  • 11

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk analysis outputs

    Selection of technologies based on actual costsConcentration Non profitable casesCalculation of “costs per user” and “costs per subscriber”Optimum solutionRest value calculations

    Critical componentsRenegotiation of components’ purchase costsProfitable services Detailed analysis of services costsRules and guidelines for viable casesMarket opportunities

  • National and Kapodistrian UNIVERSITY OF ATHENS

    An example

    Fixed BB telecommunication investments

  • 13

    National and Kapodistrian UNIVERSITY OF ATHENS

    Main cable

    Cabinet(Cab)

    Distributioncable

    Subscriber location

    Local Exchange (LE)

    CentralExchange (CE)

    Core network-

    - Fibre cable

    - Active Optoelectronic

    - WAN Interfaces

    -

    - Active

    Copper cable

    - VDSL interface

    - Passive couplers- Passive couplers

    NT NT

    Ethernet (P-t-P) FTTC

    NT

    Customers < 750m

    ATM

    OLT

    ONU

    NT NT

    ATM (P-t-MP) FTTC

    NT

    Customers < 750m

    ONU

    ATM STM4

    OLT

    ONT ONT

    PON

    ATM

    ATM (P-t-MP) FTTH/O

    ...

    GbE

    100BaseFx

    Ethernet (P-t-P) FTTH/O

    ...

    The Fixed BB scenarios

  • 14

    National and Kapodistrian UNIVERSITY OF ATHENS

    ATM Ethernet ATM EthernetDense Urban 29,45 mill € 29,40 mill € 18,31 mill € 7,47 mill € Urban 18,13 mill € 18,06 mill € -9,11 mill € -22,30 mill € Suburban -34,42 mill € -38,21 mill € -279,49 mill € -295,32 mill €

    ATM Ethernet ATM EthernetDense Urban 66,8 % 56,2 % 46,1 % 21,5 %Urban 30,8 % 29,7 % no return no returnSuburban no return no return no return no return

    ATM Ethernet ATM EthernetDense Urban 3,8 4,3 5,5 7,5Urban 5,3 5,7 no return no returnSuburban no return no return no return no return

    Net Present Value (NPV)

    AreaFibre to the Cabinet Fiber to the Home/Office

    Area

    Internal Rate of Return (IRR)FTTC FTTH/O

    Area

    Pay back Period [years]FTTC FTTH/O

    Financial results

  • 15

    National and Kapodistrian UNIVERSITY OF ATHENS

    0 Mill €

    5 Mill €

    10 Mill €

    15 Mill €

    20 Mill €

    25 Mill €

    30 Mill €

    35 Mill €

    40 Mill €

    45 Mill €

    Dense UrbanATM

    DenseUrban

    EoVDSL

    Urban ATM UrbanEoVDSL

    Suburban ATM

    SuburbanEoVDSL

    Cable_Infrastructure

    Duct_Infrastructure BuildingInfra

    CPE_Equipment

    Cabinet_EquipmentLEX_Equipment

    CEX_Equipment

    Cable Infrastructure

    Duct Infrastructure Building Infrastructure

    CPE Equipment

    CabinetEquipmentLEX Equipment

    CEX Equipment

    1 Mill €

    2 Mill €

    3 Mill €

    4 Mill €

    5 Mill €

    6 Mill €

    7 Mill €

    8 Mill €

    9 Mill €

    10 Mill €

    DenseUrbanATM

    DenseUrban

    EoVDSL

    Urban ATM UrbanEoVDSL

    SuburbanATM

    SuburbanEoVDSL

    Cabinet Equipment

    LEX Equipment

    CEX Equipment

    Zoom in:

    0 Mill €

    CAPEX figures

  • 16

    National and Kapodistrian UNIVERSITY OF ATHENS

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    FTTC– ATM,Dense Urban

    FTTCEoVDSL,

    Dense Urban

    Probability of NPV < 0 [%]

    FTTC– ATM,Urban

    FTTCEoVDSL,Urban

    FTTH/OEoVDSL,

    Dense Urban

    FTTH/OEoVDSL,Urban

    [%]

    Scenarios

    Financial risk in fixed BB investments

  • National and Kapodistrian UNIVERSITY OF ATHENS

    An example

    3G and WLAN investments

  • 18

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    The idea for 3+/4G networks

    Roaming

    Airport

    Hotel & Conference

    Publicspace

    Office

    Home

    Trainstation

    Wide area Cellular Datacom

    Local Area WLAN Datacom

    Roaming

    Airport

    Hotel & Conference

    Publicspace

    OfficeOffice

    Home

    Trainstation

    Wide area Cellular Datacom

    Local Area WLAN Datacom

  • 19

    National and Kapodistrian UNIVERSITY OF ATHENS

    Transmission rate - Mobility

    (2007-2010?)

    IMT-2000

    1 10 1000.1

    Mob

    ility

    /Dep

    loym

    ent A

    rea High Speed

    /Nationwide

    Static/Indoor

    Walking/Premises

    Moderate Speed/Citywide

    Transmission Bit Rate (Mbit/s)

    Millimeter-waveLAN

    (2001)

    (2002)Wireless LAN

    2G3G

    Systems BeyondIMT-2000

    Target Area of Service Beyond IMT-2000

  • 20

    National and Kapodistrian UNIVERSITY OF ATHENS

    WLAN Roaming

  • 21

    National and Kapodistrian UNIVERSITY OF ATHENS

    ARPU EstimationsTONIC yearly ARPU estimations

    0

    100

    200

    300

    400

    500

    600

    700

    800

    90020

    00

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    Eu

    ros

    BB Internet

    Internet

    SMS

    BB streaming

    video streaming

    audio streaming

    videoconf

    video calls & gaming CS & PS

    voice CS+PS

  • 22

    National and Kapodistrian UNIVERSITY OF ATHENS

    Sensitivity analysis

    0

    200

    400

    600

    800

    1.000

    1.200

    1.400

    1.600

    1.800

    Low Value 183 253 453 748 1.037 1.033 971 964 948 953

    High Value 1.714 1.643 1.444 1.147 860 864 926 932 961 943

    UsageTotal

    PenetrationEnd Market

    ShareStart Market

    ShareOAM UMTS BTS

    Marketing Multiplier

    Terminal Subsidy

    WLAN Building Begin

    Churn

  • 23

    National and Kapodistrian UNIVERSITY OF ATHENS

    Risk factors

    Risk in marketing parametersn Market sizen Market sharen Service determinants

    Risk and uncertainty in network parametersn Technology costsn Technology changesn Cost components evolutionn Area characteristics

  • 24

    National and Kapodistrian UNIVERSITY OF ATHENS

    Some ideas on telecommunications investments in developing countries

    Demand forecastingn Effects of cross-country diffusion processesn Competition level

    Technology selectionCritical mass effectsCommunications or telecommunications

  • 25

    National and Kapodistrian UNIVERSITY OF ATHENS

    Conclusion

    Risk analysis is a critical issue for telecom investment projectsNeed for specific problem statement,

    methodology and tools development Research is needed as well as

    coordination among key players

  • National and Kapodistrian UNIVERSITY OF ATHENS

    Time for Questions & Answers

    [email protected]