Intro to Margin Assurance by RA-V0.2

8/2/2019 Intro to Margin Assurance by RA-V0.2

1/31

Intro to Margin Assurance

Ahmad Fairuz Ali


2/31

Content:

What is Margin Assurance?

Objectives

Scope of Margin Assurance Quantification of Margin Loss Risk.

Identification of Loss margin scenario.

Margin Loss Computation Techniques. Developing a Margin Analysis Control


3/31

What is Margin Assurance

Margin assurance is a process of making sure that everyresource in your network is working towards maximizingmargins and avoiding revenue leakages.

Another term that comes up when discussing margin

assurance is revenue leakage which is any call or sessioncompleted through your network that is not billed, billedcorrectly, or routed correctly.

Margin comes when reconciliation between cost andrevenue.

Area covers are interconnect, roaming and contentbusiness.

Positive margin means the revenue is more than the cost.

Negative margin means the revenue is below the cost.


4/31

Objective

Margin assurance focusing on optimizing rate

plan by ensuring positive margin, no revenue

leakages and verification on cost.

Justify focus on finding leakages in cost

assurance.

TMForum:

Revenue leakage Relates to lost revenues where a chargeable event occurred which

should have been billed to the customer or operator but was not, or was charged at a lower rate.

Cost leakage Relates to overpayment of costs for chargeable services to a third party.


5/31

Scope

Margin assurance could come into below

streams.

Interconnect.

Content.

Roaming.


6/31

Scenario : Interconnect

Cost to

OLNOS

Revenue

from Subs


7/31

Scenario : Roaming

Cost to

OLNOS

Revenue

from Subs


8/31

Scenario : Content

Cost to

third

party

Revenue

from Subs


9/31

Quantification of Margin Loss Risk

Profit = Revenue Cost

Profit Margin = (Revenue-Cost) /Revenue

Should more equation derive to explain business needs or demands and also

ramifications functions of Revenue Assurance.


10/31

Comparing Revenue and Cost

1% gap of

duration(

s)differen

ces btw

revenue

and cost

Duration(s)

Revenue(RM)

Profit

Margin

86%


11/31


Duration(s)

Revenue(RM)

Profit

Margin

56%

2% gap of

duration(

s)differen

ces btw

revenue

and cost


12/31


Duration(s)

Revenue(RM)

Profit

Margin

64%

2% gap of

duration(

s)differen

ces btw

revenue

and cost


13/31


Duration(s)

Revenue(RM)Profit

Margin

71%

10% gap

of total

duration(

s)

differenc

es btwrevenue

and cost


14/31


Duration(s)

Revenue(RM)Profit

Margin

39%

3% gap of

duration(s)

differences

btw

revenue

and cost

Profit margin below the

minimum and expected profit

margin


15/31


Duration(s)

Revenue(RM)

Profit

Margin

70%

-4% gap

of

duration

differenc

es btwrevenue

and cost

Investigation required for -4%


16/31


Duration(s)

Revenue(RM)

Profit

Margin

74%

-10% gap

of

duration

differenc

es btw

revenue

and cost


17/31

How does this graph explain potential

revenue leakages?

Big gap of total duration captured in

Revenue(NSN/BSCS) and Cost(InBill).

IDD to Bangladesh.

Negative total duration captured.

Local OLNOS.

Low profit margin.

IDD to Nepal.


18/31

Process value chain from TRAP

Analysis should cover the process flow end to end as defined by TRAP.

Allow sharing with other affiliates in terms of information exchanges.


19/31

TRAP : Sales and Activation

Ref

A.7

Title

Low margin calls

Operator Category

Type of Leakage

Cost leakage

Area of Business Responsible

Sales & marketingDescription

An operator had negotiated preferential termination rates to four countries with analternative carrier, where previously calls had to be terminated via their PTT at higher rates.

However, it was found that calls were still being routed via their PTT resulting in lowermargin for those calls.Root Cause

Network routing had not been updated to reflect the new termination agreements.Detection

This issue was detected through a one-off CDR analysis project relating to interconnecttraffic. All agreements were reviewed and interconnect traffic analysed independently ofthe settlement process. During this exercise it was found that no traffic to these four

international destinations was being routed by this alternative carrier. On further analysisthe traffic could be seen to be routed over trunk groups associated with the PTT.Correction

The network routing tables were updated.Prevention

Formalise the procedure for informing network operations of changes to the interconnectagreements and perform spot checks that these changes have been implemented.


20/31


Ref

B.5

Title

Third party costs of orders on hold

Operator Category

MobileType of Leakage

Revenue opportunity loss and cost leakage



Internal delays with the provisioning of service for new orders gave rise to the situationwhere third parties facilities had been ordered and were being paid for even though theservice had not yet been provided to the customer and consequently no revenues werebeing generated.Root Cause

Facilities from third parties were ordered early in the provisioning process even thoughinternal issues may delay the go live date for the service.Detection

KPIs monitoring the profitability of orders showed initial negative margin.

Could be detected from UN or Nout partner at interconnect settlement.Correction

No correction for existing order was possible.Prevention

For new orders, delay the provision of third party facilities until internal dependencies havebeen met.


21/31


Ref

B.6

Title

Third party costs for cancelled circuits

Operator Category


Revenue opportunity loss and cost leakage



A provider of leased line data services was in a position where it was leasing more linesfrom its network supplier than it was selling on to its customers.Root Cause

The processes to supply and terminate leased lines were separate processes such thatwhen customers terminated their contracts or reduced the number of circuits they requiredthese circuits were not automatically flagged for resale or termination from its supplier.Detection

The profitability of the lease lines service was declining and a review of circuitutilisation was initiated. This compared customer contracts with supplier contracts and itwas found that were significantly more circuits being leased from its supplier than were

being leased to its customers.Correction

The number of circuits being leased from its supplier was reduced.Prevention

Active management of lease line cancellations with a periodic review of contracts withsuppliers to minimise over supply of leased lines.


22/31

TRAP : Production(Network)Ref

B.7

Title

Third party costs for early provision of service

Operator Category


Cost leakage


TechnologyDescription

Provision of service before due date gave rise to cost from third party suppliers before theservice was taken up and the customer was paying for the service.Root Cause

The order management process assumed a provision as quickly as possible policy inorder to minimise the possibility of missing a customer go live date.Detection

An analysis of costs versus revenues showed a revenue lag for certain customers.Correction

This issue could not be corrected for existing orders.Prevention

More sophisticated provisioning and order management scheduling algorithms wererequired so that the service is ready for operation as close to the customers go-live date aspossible whilst minimising the risk of overrunning the contracted service date thusminimising third party costs.


23/31

TRAP : Production(Network)

Ref

C.7

Title

Failure to bar IMSI from roaming

Operator Category

Type of Leakage

Revenue leakage



A mobile network allowed foreign subscribers to make and receive calls even though theoperator did not have a roaming agreement with the visiting network.

This prevented subscriber charges being raised on the visiting network, but the visitednetwork still had to pay the termination costs associated with the outgoing calls made bythe unexpected visiting subscribers.Root Cause

The network allowed these subscribers to attach to the network.

In addition, the mediation system had a lookup table of the valid roaming agreements anddropped the unexpected roaming records without generating an alert or report.Detection

An analysis of network usage from roaming subscribers summarized by visiting networkwas compared with the list of roaming agreements and the anomalies were identified.Correction

The network was updated to prevent subscribers from the identified networks attaching tothe network.Prevention

Periodic review of network roaming configuration with list of valid roaming agreements.


24/31

TRAP : Rating and Billing

Ref

C.10

Title

Failure to use least cost routing for trafficdelivery

Operator Category

Mobile

Type of Leakage

Cost leakage



An operator had agreements with a number of different interconnect partners, offeringdifferent termination charges to given destinations based on volume, time of day.

It discovered that by routing its traffic to different operators it could reduce its terminationcosts.Root Cause

The network implemented a static traffic routing plan that did not take termination costs intoaccount.Detection

Margin analysis of wholesale traffic indicated higher costs than necessary.Correction

No correction possible.Prevention

Continuous management of performance against interconnect agreements to ensure mostcost effective route is being used, at least on a daily basis. This must take into accountvolume agreements, discount and penalty rates.

Please note that the least cost route is not necessarily the best route to use due to qualityof service issues.


25/31

TRAP : Production(Network)

Ref

D.9

Title

CDR enrichment incorrect

Operator Category


Cost leakage



The introduction of a 1xxx Indirect access service temporarily caused these calls to becharged as international calls to the .Root Cause

The routing prefix was supposed to be recorded in a new field in the usage records,however the switch left the prefix on the front the B number, causing the misidentification ofthese calls.

The problems was identified in the billing system prior to invoicing, but the operator incurredcosts in correcting the problem and waiting for the switch manufacturer to deliver a newswitch build to correct the problem as source.Detection

Billing statistics showed a large increase in international traffic to the and this

caused an investigation and contribute to lower margin.Correction

The mediation system was changed to remove the routing prefix from the B number andredirect the records to the IDA processing system that charged the long distance operatorfor delivering the calls to them rather than directly to the subscribers.Prevention

Testing of new switch builds before they are introduced into the network.


26/31


Ref

H.6

Title

Revenue is shared with partners incorrectly

Operator Category


Cost leakage


FinanceDescription

Revenue share calculations are inaccurate when the content provision failed.

Root Cause

The charging rules for subscribers were different for out-payments to content providers.

Subscribers were charged on completion of the content download, whereas contentproviders were charged based on request.Detection

Margin analysis of the content service showed lower margins than expected. Furtheranalysis highlighted the difference in commercial terms between subscriber billing and thetriggering of out-payments to content providers.

Correction

No correction was possible and charging and settlements were in accordance with agreecontractual terms.Prevention

Review of contractual terms with content providers.


27/31


Ref

H.8

Title

Leasing circuits from a third party under aretail rather than wholesale contract

Operator Category

Mobile

Type of Leakage

Cost leakage



Overpayment of costs for leasing circuits due to being charged a retail rate rather than adiscounted wholesale rate.Root Cause

Procurement team failed to spot the incorrect tariff.Detection

Margin analysis showed services were operating below expected margin.Correction

The terms of the purchase were renegotiated and a rebate was made for the previousovercharging.Prevention

Review of commercial terms prior to contract signature to ensure costs in line with productplan.


28/31

TRAP : Collection and Accounting

Ref

H.10

Title

Operator fails to meet bilateral agreement

Operator Category


Cost leakage


FinanceDescription

Traffic volumes sent to a third party operator do not meet the volume agreement.

In this case the operator still has to pay for the full volume, effectively increasing thetermination of the traffic sent to this operator, thus impacting margin on that traffic.Root Cause

When a lower cost became available for a certain traffic class, traffic was re-routed usingthis lower cost operator without taking into account the volume agreement with the originaloperator.Detection

Margin analysis revealed lower margin on this traffic than expected.Correction

No correction was possible as the issue was only detected at the end of the accountingperiod.Prevention

Improvements to the least cost routing algorithms to take into account volume agreementswhen termination rates change.


29/31

TRAP : Collection and Accounting

Ref

H.13

Title

Wholesale recharges incorrectly calculated

Operator Category


Cost leakage


FinanceDescription

Recharges of third party costs inaccurately calculated and passed on.

Root CauseNot all of the third party costs involved in providing a corporate data services were identifiedas being associated with the customer resulting in undercharging of the customer.Detection

An audit of procured services versus sales invoices showed a discrepancy. Many of theseassets were active and associated with the supply of live services.Correction

The unbilled active assets were identified and recharged to the appropriate customer,some back billing was possible.

Please note that some stranded assets were also identified during the course of thisinvestigation and analysis.Prevention

Effective coordination of the procurement of third party services and onward billing ofcustomers.


30/31

TODO List

Margin Loss Computation Techniques.

Developing a Margin Analysis Control for

automation and case management escalation.


31/31

References.

www.google.com

www.tmforum.com
http://www.google.com/http://www.tmforum.com/http://www.tmforum.com/http://www.google.com/

Intro to Margin Assurance by RA-V0.2

Documents

Transcript of Intro to Margin Assurance by RA-V0.2