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

National and Kapodistrian UNIVERSITY OF ATHENS

Incorporating risk analysis into telecom investment projects

Dr. Dimitris VAROUTASLecturerUniversity of Athens Dept of Informatics & Telecommunications

[email protected]

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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


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


Consolidation of results and guidelines for deployment scenarios

Information gathering / exchange

Common framework

Network Studies

Guidelines

Standards, Research projectsand field trials

Other Sources

Commonconclusions

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Steps in technoeconomic modelling

Marketing Strategy Services

Network Technology

ComponentsCost

MarkerShare

Prices Revenues

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Risk and uncertainty are the only certain factors

Marketing Strategy Services

Network Technology

ComponentsCost

MarkerShare

Prices Revenues

RISK RISK RISK RISK RISK

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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?

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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

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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

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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

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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


An example

Fixed BB telecommunication investments

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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

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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

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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

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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


An example

3G and WLAN investments

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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

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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

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WLAN Roaming

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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

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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

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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

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Some ideas on telecommunications investments in developing countries

Demand forecastingn Effects of cross-country diffusion processesn Competition level

Technology selectionCritical mass effectsCommunications or telecommunications

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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


Time for Questions & Answers

[email protected]

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

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