OPERATIONAL RISK MANAGEMENT & COMPLIANCE

© 2012 – PROPRIETARY AND CONFIDENTIAL INFORMATION OF CVIDYA

Beyond Prevention: Revenue Assurance Margin Analysis

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Agenda

Market Trends

Why Margin Analysis

Margin Analysis on top of Revenue Assurance

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Market Trends

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Trends in the Market – New Challenges?

New technologies

New pricing models

New services

Additional players in the revenue chain

Data traffic explosion

Market Trends - New Challenges

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Global Mobile Data Traffic Drivers

More Mobile Connections Faster Mobile Speeds

More Mobile Users More Mobile Video

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Data Traffic Explosion

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The Hunger Games

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New technologies (LTE)

New business models

Policy-based charging

Data sharing family plans

Results of the ever-hungry bandwidth consumer:

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Variety of Pricing Models

UNLIMITED DATA DATA THROTTLING

• 3GB of usage per month for

3G unlimited customers • 5GB for 4G LTE customers

and then throttling • 2GB of data per month and

then throttling only on congested cells

DEVICE PACKAGES

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Why Margin Analysis?

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The Need …

Money… Operators are under increasing market and competitive pressure

While OPEX and CAPEX costs must be lowered, shareholder demands for increased values must

be met

Understand the Revenues

Identify the Costs

Optimize the Margins

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Why is Margin Analysis So Important Now?

Multiple operators have been licensed to compete, so tweaking services to achieve maximum profitability has never been more important

Over-the-top players are not only eating scarce bandwidth, they are offering profit-killing alternatives to voice and SMS

Revenue per subscriber is decreasing, and operators needs to remain profitable, protect their business and exploit opportunities

Service-bundling has exploded, and triple\quad-play operators need to gain a consolidated view of margins

Interconnect and content partners have expanded, underscoring the need to monitor these partners from a service profitability aspect

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Traditional Approaches for Margin Analysis

For years people have been performing margin analysis using Excel spreadsheets

In the early 90s, margin analysis was also a key benefit of owning a data warehouse

Why are these approaches less than optimal?

Time consuming

Results are not granular enough

Excel is suited to producing periodic reports (monthly\quarterly). Once product categories are mixed and segmentation is required, the Excel model becomes clumsy

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A long term goal of many RA organizations is to understand profitability for different segmentations

Determine revenue generated and cost , effectively analyzing the margin per segmentation

The Goal

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Margin Assurance

Conceptually: Margin = Revenue - Costs

Verify that each segmentation, or group of segmentations, has a positive margin

Costs include:

– Direct costs, for example, payment to a partner per minute for calls

– Indirect costs, for example, network costs, customer acquisition costs (indirect costs are more difficult to define)

By using direct costs only, it is still possible to set upper limits on the margins

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Margin Challenges Revenue challenges

Multiple rate plans and bundle complexity

Consumption- or service-based charging

Quality of service-based ratings

Cost challenges

Partnership arrangements and commissions

Interconnect partnerships, where wholesale rates are higher than retail rates

Content supplier relationship where content received and paid for is not delivered or billed

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Margin Analysis on-top of a Revenue Assurance Solution

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Easy to Implement — Based on RA Data

Margin analysis and Revenue Assurance are

complimentary activities that share similar techniques

and information

RA paves the way for margin analysis since most of the

source data has already been collected, normalized, and

augmented with additional data (e.g., customers’

demographic, regional, and network information)

Since platform is based on xDR-level (not just aggregate

numbers), operators can view various dimensions in

highly granular segmentations

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What Should Be Analyzed?

Content providers

International carriers

Inter-carrier traffic

MVNOs

Content Provider

A

Soccer Video

Basketball Results

Golf Updates

Sports Package

Settlement

Settlement

Content Provider

B

Content Provider

C

National Geographic

The Wild Life

Discovery

Nature Package

The Runner

Poker

Packman

Games

CSP

Austria 0.25$

Belgium 0.20$

Hungary 0.30$

Zone A (0.25$)

Settlement

Settlement

CSP Germany 0.55$

Italy 0.45$

France 0.50$

Zone B (0.50$)

UK 0.75$

Spain 0.70$

Romania 0.80$

Zone C (0.75$)

International A

International B

National Carrier

A

Transit Traffic

Terminating Traffic

Orginating Traffic

Carrier A

Settlement

Settlement

National Carrier

B

National Carrier

C

CSP Transit Traffic

Terminating Traffic

Orginating Traffic

Carrier B

Transit Traffic

Terminating Traffic

Orginating Traffic

Carrier C

CSP

MVNO A

MVNO B

MVNO C

Transit Traffic Orginating Traffic SMS

Data Terminating

A

Settlement

Settlement

Transit Traffic Orginating Traffic SMS

Data Terminating

B

Transit Traffic Orginating Traffic SMS

Data Terminating

C

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Most Important Uses for Margin Analysis

Service hierarchies

Margins on hierarchies of services and sub- services

Pricing plan analysis

Analyze whether a pricing plan has a high or a low margin

Customer usage patterns for a particular plan

Market segmentation

Customer profitability in great detail - margins for subscribers per region, business customers in a particular industry, etc.

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Most Important Uses for Margin Analysis

LTE service monitoring – QoS-based pricing, bandwidth consumption, services enhanced during an actual session, etc.

Analyzing service margins and profitability presents a challenge

Complex plans (e.g. Friends and Family mobile data plans)

Requires constant vigilance to ensure profitability, since there are many variables that could make costs spike

Experimentation, testing and “what if” scenarios

Uptake of a particular service is getting tougher to forecast - being able to assess the margins of a service in advance or soon after launch is critical for making adjustments to the product

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Financial Dashboards

Centralized financial dashboard, configurable to organizational business topology

Financial impact reporting, tracking and decision support for C-level, CFO, Risk Management, RA experts, Management, and others

Drill down for impact on relevant business entities (revenue streams, services, platforms, customer types)

Hierarchical finance trend analysis and deviation detection

Forecasting and “what if” scenarios for selected entities based on common forecasting models

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Margin Analysis Dashboard Example

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Margin Analysis – The Full Picture

Margins

Customer Segment

Service

Subscriber Invoices

Partner Settlements

Exact revenue & costs

Revenue Assurance

Adjusting parameters – Impact margins?

Destination Rates

Plan Bundle

Best approach to maximize margin

Automatic

Recommendations

Service Type

Customer Segment

You Need to Know

Service Type

Region Margin Analysis

Where are you underperforming?

Service in Bundle

Pricing Plan

“What if” Analysis

Why you are underperforming?

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