Wireless Finance Terms and Reference

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Wireless Finance Terms and Reference (eBook Edition)

Version: 1

www.Telecom-cloud.net

Copyright 2011 by Harish VadadaAll rights reserved.

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No part of the this work may be reproduced or transmitted in any form or by any means, electronic or mechanical,

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information contained in this work.


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Introduction

As a technologist in the wireless industry for over a decade I have been flummoxed multiple times at the

financial terms and metrics that get mentioned. Hence, I decided to create this eBook to address all the

wireless financial terms and more to demystify the wireless metrics for a layman, having seen the

business in motion as an insider. The metrics described here are used as a standard to compare the

profitability and health of a network operator. My goal is to demystify the business processes and aura

surrounding the buzzwords that are used in the wireless business.

I attribute this drive of mine to all the professors and teachers that I have associated with in my life.

They had made learning fun and in the process embedding in me the bug of lifelong association of

learning, teaching and mentoring. I come from a family of teachers my grandfather was a teacher, mydads first job was a teacher and he became a teacher after he retired from the corporate world. I

attribute this passion for sharing knowledge for being in my genes. And I fuel this passion of sharing my

knowledge online through my blog www.telecomcloud.net as well as through a Social Training

network www.gyanfinder.com of which I am a cofounder.

I believe in Keeping it Simple, honest and free! Please send me suggestions and improvements and let

me know if I can help you in your endeavor.

Acknowledgements

To my parents who made me; and my wife and kids who sustain me.


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ACSI (American Customer Satisfaction Index) Created by the National Quality Research Center at the

University of Michigan. ACSI reports scores on a 0100 scale at the national level and produces indexes

for 10 economic sectors, 47 industries (including ecommerce and ebusiness), more than 225

companies, and over 200 federal or local government services. In addition to the companylevel

satisfaction scores, ACSI produces scores for the causes and consequences of customer satisfaction and

their relationships. The measured companies, industries, and sectors are broadly representative of the

U.S. economy serving American households. ACSI releases results on a monthly basis to bring

stakeholders indepth coverage of various sectors of the economy throughout the entire calendar year.

The national index is updated quarterly, factoring in ACSI scores from more than 225 companies in 47

industries; 2 local government services; and over 200 programs, services, and websites offered by 130

federal agencies.(URL: www.theacsi.org/)

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AAL (AddaLine) Add another phone service line to an existing account.

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Advantages of Proposition Unique Selling Proposition (USP), competitive advantage for the seller to

stand apart from competition. It is a marketing concept that was first proposed as a theory to explain a

pattern among successful advertising campaigns of the early 1940s. It states that such campaigns made

unique propositions to the customer and that this convinced them to switch brands. The term was

invented by Rosser Reeves of Ted Bates & Company. Today the term is used in other fields or just

casually to refer to any aspect of an object that differentiates it from similar objects.

Pinpointing USP requires some hard soulsearching and creativity. One way to start is to analyze how

other companies use their USPs to their advantage. This requires careful analysis of other companies'

ads and marketing messages. A careful analysis of what they say they sell, not just their product or

service characteristics, we can learn a great deal about how companies distinguish themselves from

competitors e.g. Neiman Marcus sells luxury, while WalMart sells bargains.

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Amortization depreciation of intangible assets. When used in the context of a home purchase,

amortization is the process by which the loan principal decreases over the life of the loan. With eachmortgage payment that is made, a portion of the payment is applied towards reduction of the principal

and another portion of the payment is applied towards paying the interest on the loan. While

amortization and depreciation are often used interchangeably, technically this is an incorrect practice

because amortization refers to intangible assets and depreciation refers to tangible assets.

The amortization calculator formula is:


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Or, equivalently

Where: P is the principal amount borrowed, A is the periodic payment, r is the periodic interest rate

divided by 100 (annual interest rate also divided by 12 in case of monthly installments), and n is the total

number of payments (for a 30year loan with monthly payments n = 30 12 = 360).

Negative amortization (also called deferred interest) occurs if the payments made do not cover the

interest due. The remaining interest owed is added to the outstanding loan balance, making it larger

than the original loan amount.

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AMPU (Average Margin per user) AMPU stands for Average Margin per User and is the difference

between the cost of serving a user and the revenue that the user generates. AMPU can be positive or

negative. Higher the AMPU, the greater the profit.

AMPU = ARPU Average Cost per User

Or

AMPU = Total Margin/ Number of Subscribers

AMPU takes into consideration both Revenue and Cost. Types of revenue factors.

Non Recurring Revenue: These are the revenue sources that are one time charge for the customer and

are to be recovered as soon as the customer enters the network.

Activation Charges

Security Deposit

Recurring Revenue: These are recovered as and when the customer makes a usage or avail off certain

Rental services.

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ARPU (Average Revenue per User) Service Revenue divided by number of subscribers. ARPU is

commonly calculated by dividing the aggregate amount of revenue by the total number of users who

provide that revenue. Other measurements are tracked as well, including the revenue generated by new

customers as compared with the revenue generated by existing customers and the revenue generated

by new services as compared with the revenue generated by existing services.

ARPU is not the best indicator of carriers health. Average Margin Per User (AMPU) or Average Profit Per

User (APPU) per month or over the life of the subscriber are better measures of carriers strategy and

execution, however, since such details are not public knowledge, ARPU trending over time provides a


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Basis Points (bps) A basis point is a unit of measure used in finance to describe the percentage change

in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a

percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.

For example, if the Federal Reserve Board raises interest rates by 25 basis points, it means that rates

have risen by 0.25% percentage points. If rates were at 2.50%, and the Fed raised them by 0.25%, or 25

basis points, the new interest rate would be 2.75%. In the bond market, a basis point is used to refer to

the yield that a bond pays to the investor. For example, if a bond yield moves from 7.45% to 7.65%, it is

said to have raised 20 basis points.

The usage of the basis point measure is primarily used in respect to yields and interest rates, but it may

also be used to refer to the percentage change in the value of an asset such as a stock. It may be heardthat a stock index moved up 134 basis points in the day's trading. This represents a 1.34% increase in the

value of the index.

1 basis point = 1 permyriad = one one-hundredth percent

1 bp = 1/100%= 0.01% = 0.1 = 104 = 110000 = 0.0001

It is frequently, but not exclusively, used to express differences in interest rates of less than 1% per year.

For example, a difference of 0.10% is equivalent to a change of 10 basis points (e.g. a 4.67% rate

increases by 10 basis points to 4.77%).

Like percentage points, basis points avoid the ambiguity between relative and absolute discussions

about interest rates by dealing only with the absolute change in numeric value of a rate. For example, if

a report says there has been a "1% increase" from a 10% interest rate, this could refer to an increase

either from 10% to 10.1% (relative, 1% of 10%), or from 10% to 11% (absolute, 1% plus 10%). If,

however, the report says there has been a "10 basis point increase" from a 10% interest rate, then we

know that the interest rate of 10% has increased by 0.10% (the absolute change) to a 10.1% rate. It is

common practice in the financial industry to use basis points to denote a rate change in a financial

instrument, or the difference (spread) between two interest rates, including the yields of fixedincome

securities.

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Below the Line expenses such as depreciation that are not directly controllable by a business owner,

therefore excluded from certain P&Ls.

Accounting: Used to characterize items in an account that are excluded from the account total, such as

appropriations and extraordinary items that have no effect on the profit or loss in the current

accounting period.


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Advertising: Used to characterize promotional methods (such as catalog marketing, direct marketing,

and trade fair marketing) those are under the direct control of the marketer (client) and earn no

commissions for the advertising agency.

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Benchmarking process of comparing ones business processes and performance metrics to industry

bests and/or best practices from other industries. Dimensions typically measured are quality, time, and

cost. Improvements from learning mean doing things better, faster, and cheaper.

Benchmarking involves looking outward (outside a particular business, organization, industry, region or

country) to examine how others achieve their performance levels and to understand the processes they

use. In this way benchmarking helps explain the processes behind excellent performance. When the

lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improvedperformance in critical functions within an organization or in key areas of the business environment.

Application of benchmarking involves four key steps:

Understand in detail existing business processes

Analyze the business processes of others

Compare own business performance with that of others analyzed

Implement the steps necessary to close the performance gap

Benchmarking should not be considered a oneoff exercise. To be effective, it must become an ongoing,

integral part of an ongoing improvement process with the goal of keeping abreast of everimproving

best practice.

Strategic Benchmarking: Where businesses need to improve overall performance by examining the long

term strategies and general approaches that have enabled highperformers to succeed. It involves

considering high level aspects such as core competencies, developing new products and services and

improving capabilities for dealing with changes in the external environment.

Performance or Competitive Benchmarking: Businesses consider their position in relation to

performance characteristics of key products and services. Benchmarking partners are drawn from the

same sector. This type of analysis is often undertaken through trade associations or third parties to

protect confidentiality.

Process Benchmarking: Focuses on improving specific critical processes and operations. Benchmarking

partners are sought from best practice organizations that perform similar work or deliver similar

services.

Functional Benchmarking: Businesses look to benchmark with partners drawn from different business

sectors or areas of activity to find ways of improving similar functions or work processes. This sort of

benchmarking can lead to innovation and dramatic improvements. Improving activities or services for

which counterparts do not exist.


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Internal Benchmarking: Involves benchmarking businesses or operations from within the same

organization (e.g. business units in different countries). The main advantage of internal benchmarking is

that access to sensitive data and information is easier; standardized data is often readily available; and,

usually less time and resources are needed.

External Benchmarking: Involves analyzing outside organizations that are known to be best in class.

External benchmarking provides opportunities of learning from those who are at the "leading edge".

This type of benchmarking can take up significant time and resource to ensure the comparability of data

and information, the credibility of the findings and the development of sound recommendations.

International Benchmarking: Best practitioners are identified and analyzed elsewhere in the world,

perhaps because there are too few benchmarking partners within the same country to produce valid

results. Globalization and advances in information technology are increasing opportunities for

international projects. However, these can take more time and resources to set up and implement andthe results may need careful analysis due to national differences.

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Blue Ocean Strategy high growth and profit can be generated by creating new demand in an

uncontested market space of industries and/or markets not in existence today, a Blue Ocean, instead

of competing head to head for known customers in an existing industry, a Red Ocean. Blue oceans, in

contrast, denote all the industries not in existence todaythe unknown market space, untainted by

competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for

growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of

the game are waiting to be set. Blue Ocean is an analogy to describe the wider, deeper potential of

market space that is not yet explored. Cirque du Soleil an example of creating a new market space, by

blending opera and ballet with the circus format while eliminating star performer and animals. (URL:

http://www.blueoceanstrategy.com/)

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Business Model describes the rationale of how an organization creates, delivers, and captures value.

The process of business model construction is part of business strategy. A business model is used for a

broad range of informal and formal descriptions to represent core aspects of a business, including

purpose, offerings, strategies, infrastructure, organizational structures, trading practices, andoperational processes and policies. Hence, it gives a complete picture of an organization from a high

level perspective.

Whenever a business is established, it either explicitly or implicitly employs a particular business model

that describes the architecture of the value creation, delivery, and capture mechanisms employed by

the business enterprise. The essence of a business model is that it defines the manner by which the

business enterprise delivers value to customers, entices customers to pay for value, and converts those

payments to profit: it thus reflects managements hypothesis about what customers want, how they


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want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a

profit.

A business model draws on several business processes including economics, entrepreneurship, finance,marketing, operations and strategy. Some of the main components addressed by a business model are,

Value Proposition: A description of a customer problem and how the product looks to mitigate this.

Market Segment: A group of customers that is targeted by the ensuing product.

Value Chain Structure: The company's position and activities in the value chain and how the firm looks

to capture this value chain.

Revenue generation and margins: How revenue for the company is generated sales, subscriptions,

support and the cost structure associated as well as the targeted profit.

Competitive Analysis and Strategy: Identify existing competitors and how the company will address to

develop a sustainable advantage over competitors._____________________________________________________________________________________

Buyers Remorse Customer cancels service without incurring ETF within the remorse period & has

returned the device. It may stem from fear of making the wrong choice, guilt over extravagance, or a

suspicion of having been overly influenced by the seller. The anxiety may be rooted in various factors,

such as: the person's concern they purchased the wrong product, purchased it for too high a price,

purchased a current model now rather than waiting for a newer model, purchased in an ethically

unsound way, purchased on credit that will be difficult to repay, or purchased something that would not

be acceptable to others.

A prospective buyer often feels positive emotions associated with a purchase (desire, a sense of

heightened possibilities, and an anticipation of the enjoyment that will accompany using the product,

for example); afterwards, having made the purchase, they are more fully able to experience the

negative aspects: all the opportunity costs of the purchase, and a reduction in purchasing power.

Also, before the purchase, the buyer has a full array of options, including not purchasing; afterwards,

their options have been reduced to:

Continuing with the purchase, surrendering all alternatives

Renouncing the purchase

Buyer's remorse can also be caused or increased by worrying that other people may later question the

purchase or claim to know better alternatives.

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CAGR (Compound Annual Growth Rate) annualized gain of an investment over a given time period.

CAGR is often used to describe the growth over a period of time of some element of the business, for

example revenue, units delivered, registered users, etc.


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CAGR is the best formula for evaluating how different investments have performed over time. Investors

can compare the CAGR in order to evaluate how well one stock performed against other stocks in a peer

group or against a market index. The CAGR can also be used to compare the historical returns of stocks

to bonds or a savings account.

When using the CAGR, it is important to remember two things: the CAGR does not reflect investment

risk, and the same time periods must be used. Investment returns are volatile, meaning they can vary

significantly from one year to another, and CAGR does not reflect volatility. CAGR is a pro forma number

that provides a "smoothed" annual yield, so it can give the illusion that there is a steady growth rate

even when the value of the underlying investment can vary significantly. This volatility, or investment

risk, is important to consider when making investment decisions.

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Cannibalization reduction in sales volume, sales revenue, or market share of one product as a result of

the introduction of a new product by the same producer. If a company is practicing market

cannibalization, it is eating its own market. For example, say Pepsi puts out a new product called Pepsi

chill, and customers buy Pepsi chill instead of regular Pepsi. Although sales may be up for the new

product, these sales may be eating into Pepsi's original market, in which case the overall company sales

would not be increasing. Because of the possibility of market cannibalization, investors should alwaysdig deeper, analyzing the source and impact of the success of a company's new but similar product.

Identification of cannibalization is by no means clearcut and needs to take into account of the dynamics

of the market. This needs examination by three methods.

Gains loss analysis

Duplication of purchase

Deviations from expected share movements

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Capacity Charge cost of sustaining and expanding a wireless carriers infrastructure, can be assigned tousers based on bandwidth usage or other methodology.The capacity charge, sometimes called Demand

Charge, is assessed on the amount of capacity being purchased.

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Capacity Utilization extent to which an enterprise actually uses its productive capacity. It refers to the

relationship between actual output that 'is' produced with the installed equipment and the potential

output which 'could' be produced with it, if capacity was fully used.


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CAPEX/Capex (Capital Expenditure) investment to create future benefits. A capital expenditure is

incurred when a business spends money either to buy assets or to add to the value of an existing asset

with a useful life that extends beyond the taxable year. Also referred to as Capital Investments, for tax

purposes, CAPEX is a cost which cannot be deducted in the year in which it is paid or incurred and must

be capitalized. The general rule is that if the acquired property's useful life is longer than the taxable

year, then the cost must be capitalized. The capital expenditure costs are then amortized or depreciated

over the life of the asset in question.

Included in capital expenditures are amounts spent on:

Acquiring fixed, and in some cases, intangible assets

Repairing an existing asset so as to improve its useful lifeUpgrading an existing asset if its results in a superior fixture

Preparing an asset to be used in business

Restoring property or adapting it to a new or different use

Starting or acquiring a new business

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Cap-and-trade A market mechanism designed to reduce the cost of cutting pollution. The regulator

caps pollution at a level below businessasusual and allocates allowances to industry up to but not

exceeding the cap. Covered entities must have their emissions independently verified and must

surrender allowances to match their annual emissions each year, normally with penalties for non

compliance. Since the overall cap is below actual emissions, this cuts the overall level of pollution and

creates a scarcity of allowances, and therefore a monetary value. Those with a surplus may sell them to

those with a shortfall, creating a tradable market for allowances.

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Capital Efficiency ratio of output divided by CAPEX. The larger the ratio, the better the capital

efficiency. The basic formula for calculating capital efficiency involves dividing the average value of

output by the rate of expenditure for the same period of time. Output divided by expenditure will help

to make it clear if a venture is currently generating a modest profit, is approaching a point whereprofitability will be realized once expenditures are decreased, or if there is no real value in continuing to

fund the venture. While the latter situation is one to avoid at all costs, the two former possible states

are not situations that should be considered negative.

Because many business ventures begin with a higher level of capital expenditures, a project rarely

realizes a profit in the first stages of the operation. The expectation is that after the initial launch, some

expenses will be settled and not be recurring. As the rate of expenditure decreases and the output or

production increases, the opportunity for profit expands. For this reason, periodic calculation of the

capital efficiency of a project can help investors know that the project is heading in the right direction.


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Capital Intensity A business process or an industry that requires large amounts of money and other

financial resources to produce a good or service. A business is considered capital intensive based on the

ratio of the capital required to the amount of labor that is required.

Some industries commonly thought of as capital intensive include oil production and refining,

telecommunications and transports such as railways and airlines. Another example is the auto industry

which is capitalintensive because, in order to make cars, it requires a lot of workers and expensive

equipment that must be properly maintained. Another, smaller scale example is a dentist office, which

requires expensive equipment and materials. In order to stay afloat, capital intensive companies need

either consistently large profits or inexpensive credit.

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Capital Injection An investment of capital generally in the form of cash or equity and rarely, assets

into a company or institution. The word "injection" connotes that the company or institution into which

capital is being invested may be floundering or in some distress, although it is not uncommon for the

term to also refer to investments made in a startup or new company.

Capital injections in the private sector are usually made in exchange for an equity stake in the company

into which capital is being injected. However, governments may make capital injections into struggling

sectors to assist in their stabilization in the larger public interest; in such cases, a government may or

may not negotiate an equity stake in recipient companies or institutions.

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Cash Cost Per User (CCPU) Measure of the monthly cost to serve a customer, derived by dividing total

operating costs by average number of users. It is a measure of the monthly costs to operate the

business on a per subscriber basis consisting of costs of service and operations, and general and

administrative expenses of consolidated statement of operations, plus handset subsidies on equipment

sold to existing subscribers, less stockbased compensation expense.

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Churn average number of customers discontinuing service during a period. The broad definition ofchurn is the action that a customers telecommunications service is canceled. This includes both service

provider initiated churn and customer initiated churn. An example of serviceprovider initiated churn is a

customers account being closed because of payment default. Customer initiated churn is more

complicated and the reasons behind vary. Examples of reason codes are: unacceptable call quality, more

favorable competitors pricing plan, misinformation given by sales, customer expectation not met, billing

problem, moving, and change in business, and so on.

Churn can be shown as follows:


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Monthly Churn = (C0 + A1 - C1) / C0

Where:

C0 = Number of customers at the start of the monthC1 = Number of customers at the end of the month

A1 = Gross new customers during the month

As an example, suppose a carrier has 100 customers at the start of the month, acquires 20 new

customers during the month, and has 110 customers at the end of the month. It must have lost 10

customers during the month, 10 percent of the customers it had at the start of the month.

According to the formula:

Monthly Churn = (100 + 20 - 110) / 100 = 10%

In an intensely competitive environment, customers receive numerous incentives to switch and

encounter numerous disincentives to stay.

Price: Particularly in the wireless and longdistance markets, carriers often offer pricing promotions,

such as relatively low monthly fees, highvolume offerings (fixed number of minutes at a reasonable fee

per month), and low rates perminute.

Service quality: Lack of connection capabilities or quality in places where the customer requires service

can cause customers to abandon their current carrier in favor of one with broader reach or a more

robust network.

Fraud: Customers may attempt to game the system by generating high usage volumes and avoiding

payment by constantly churning to the next competitor.

Lack of carrier responsiveness: Slow or no response to customer complaints is a sure path to a customer

relations disaster. Broken promises, long hold times when the customer reports problems, and multiple

complaints related to the same issue are sure to lead to customer churn.

Lack of features: Customers may switch carriers for features not provided by their current carrier. This

might include the inability of a particular carrier to be the onestop shop for the entire customers

Communications needs.

New technology or product introduced by competitors: New technologies such as highspeed data or

bundled highvalue phone offerings like iPhone create significant opportunities for carriers to entice

competitors customers to switch.

Billing or service disputes: Billing errors, incorrectly applied payments, and disputes about service

disruptions can cause customers to switch carriers. Depending on the situations, such churn may be

avoidable.

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COGS (Cost of Goods Sold) direct costs attributable to the production of products or services sold by a

company. It includes cost of materials and labor used in creation, as well as indirect expenses such as

distribution costs and sales force costs. For example, the COGS for a PC maker would include the


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material costs for the parts that go into making the PC along with the labor costs used to put the

computer together. The cost of sending the computer to sellers like Bestbuy and the cost of the labor

used to sell them would be excluded. The exact costs included in the COGS calculation will differ from

one type of business to another. The cost of goods attributed to a companys products is expensed as

the company sells these goods. There are several ways to calculate COGS but one of the more basic

ways is to start with the beginning inventory for the period and add the total amount of purchases made

during the period then deducting the ending inventory. This calculation gives the total amount of

inventory or, more specifically, the cost of this inventory, sold by the company during the period.

_____________________________________________________________________________________

Competitive Advantage A competitive advantage is an advantage over competitors gained by offering

consumers greater value, either by means of lower prices or by providing greater benefits and service

that justifies higher prices. In other words it is a position of a company in a competitive landscape thatallows them to earn return on investments higher than the cost of investments.

Differentiation Strategy: This strategy involves selecting one or more criteria used by buyers in a market

and then positioning the business uniquely to meet those criteria. This strategy is usually associated

with charging a premium price for the product often to reflect the higher production costs and extra

valueadded features provided for the consumer. Differentiation is about charging a premium price that

more than covers the additional production costs, and about giving customers clear reasons to prefer

the product over other, less differentiated products. eg. Porsche

Cost Leadership Strategy: With this strategy, the objective is to become the lowestcost producer in the

industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed

minimizing costs. If the achieved selling price can at least equal (or near) the average for the market,

then the lowestcost producer will (in theory) enjoy the best profits. This strategy is usually associated

with largescale businesses offering "standard" products with relatively little differentiation that are

perfectly acceptable to the majority of customers. Occasionally, a lowcost leader will also discount its

product to maximize sales, particularly if it has a significant cost advantage over the competition and, in

doing so, it can further increase its market share. eg. WalMart, Dell Computers

Differentiation Focus Strategy: In the differentiation focus strategy, a business aims to differentiate

within just one or a small number of target market segments. The special customer needs of the

segment mean that there are opportunities to provide products that are clearly different from

competitors who may be targeting a broader group of customers. The important issue for any business

adopting this strategy is to ensure that customers really do have different needs and wants in other

words that there is a valid basis for differentiation and that existing competitor products are not

meeting those needs and wants. eg. Perfumania, All things remembered

Cost Focus Strategy: Here a business seeks a lowercost advantage in just one or a small number of

market segments. The product will be basic perhaps a similar product to the higherpriced and

featured market leader, but acceptable to sufficient consumers. Such products are often called "me

too's". eg. Many smaller retailers featuring ownlabel or discounted label products.


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_____________________________________________________________________________________

Contra Account account on a financial statement (balance sheet and P&L) that offsets the activity of a

related and corresponding account. When it comes to an example of how one account offsets another

account, perhaps the easiest illustration would be to take an account that records accumulated

amortization into account. In order to balance the debit position associated with the amortization, an

opposite or contra account with the balance sheet structure will represent a credit that essentially

offsets the amortized figure. This helps to maintain a balance between debits and credits in the

bookkeeping process.

However, it must be understood that the concept of the contra account does not always involve a credit

offsetting a debit. The basic function of a contra account is simply to be an opposite of another account.

This means that an account showing a debit would be a type of contra account usually known as a

contraliability account. By the same token, an account with a credit would be balanced by a contraasset account.

_____________________________________________________________________________________

Core accounts and services for customers with good credit who are billed after services are received.

_____________________________________________________________________________________

Cost-Benefit Analysis economic tool that weighs the total expected costs against the total expected

benefits of one or more actions in order to choose the best or most profitable option.

Cost Benefit Analysis is an economic tool to aid decisionmaking, and is typically used by organizations to

evaluate the desirability of a given intervention in markets. Costbenefit analysis is mostly, but not

exclusively, used to assess the value for money of very large private and public sector projects. This is

because such projects tend to include costs and benefits that are less amenable to being expressed in

financial or monetary terms (e.g. environmental damage), as well as those that can be expressed in

monetary terms. Private sector organizations tend to make much more use of other project appraisal

techniques, such as rate of return, where feasible.

The practice of costbenefit analysis differs between countries and between sectors (e.g. transport,

health) within countries. Some of the main differences include the types of impacts that are included as

costs and benefits within appraisals, the extent to which impacts are expressed in monetary terms and

differences in discount rate between countries.

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Covered POP - Population covered by a wireless networks coverage footprint.

_____________________________________________________________________________________

CPGA - Cost Per Gross Add. A ratio used to quantify the costs of acquiring one new customer to a

business. Often, the CPGA ratio is used by companies that offer subscription services to clients, such as


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wireless companies and satellite radio companies.

_____________________________________________________________________________________

Customer Lifetime Value (CLV) a financial concept that represents how much each customer is worth

in dollar terms, and therefore exactly how much a company should spend to acquire and keep each

customer. CLV is calculated using a model and inputting various estimates and simplifying assumptions.

In reality, there are several variations of CLV available due to the complexity and uncertainty of

customer behavior.

In wireless, CLV can also be:

CLV = ((ARPU Variable CCPU) x Tenure) (SAC + Capacity Charge)

CLV in wireless:

CLV (customer lifetime value) calculation process consists of four steps:

Forecasting of remaining customer lifetime in years

Forecasting of future revenues year-by-year, based on estimation about future products purchased

and price paid

Estimation of costs for delivering those products

Calculation of the net present value of these future amounts

Forecasting accuracy and difficulty in tracking customers over time may affect CLV calculation

process

_____________________________________________________________________________________

DARPU Data Average Revenue per User. Total Data Revenue divided by number of subscribers.

_____________________________________________________________________________________


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DCF (Discounted Cash Flow) - method of valuing a project, company, or asset using Time Value of

Money. All future cash flows are estimated and discounted to give their Present Values (PVs). The sum

of all future cash flows, both incoming and outgoing, is the Net Present Value (NPV), which is taken as

the value of the cash flows.

Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most

often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate

the potential for investment. If the value arrived at through DCF analysis is higher than the current cost

of the investment, the opportunity may be a good one.

Calculated as:

Also known as the Discounted Cash Flows Model. The purpose of DCF analysis is just to estimate the

money to be received from an investment and to adjust for the time value of money.

_____________________________________________________________________________________

Depreciation accounting method to attribute the cost of an asset over the assets useful life.

Amortization is the term usually used for depreciation of intangible assets. Depreciation is used in

accounting to try to match the expense of an asset to the income that the asset helps the company

earn. For example, if a company buys a piece of equipment for $10 million and expects it to have a

useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will

expense $1000, 000 (assuming straightline depreciation), which will be matched with the money that

the equipment helps to make each year.

_____________________________________________________________________________________

Discount Rate used in financial calculations to bring the value of anticipated future cash flows to the

present. Often it is chosen to be equal to the cost of capital. Some adjustment may be made to thediscount rate to take account the risks associated with uncertain cash flows.

_____________________________________________________________________________________

Disruptive App Anapp which takes away potential revenue from its carrier. For example, Skype may

lower a carriers airtime and/or long distance revenue even though its bandwidth costs the carrier more

in capacity charges/opportunity costs.

_____________________________________________________________________________________


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Disruptive Technology innovations that improve a product or service in ways that the market does not

3expect, typically by lowering price or designing for a different set of consumers. Example WiMAX which

accelerated the development of 3GPPLTE.

_____________________________________________________________________________________

Earnings Per Share (EPS) Earnings returned on an initial investment amount. The portion of a

company's profit allocated to each outstanding share of common stock. Earnings per share serve as an

indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the

reporting term, because the number of shares outstanding can change over time. However, data

sources sometimes simplify the calculation by using the number of shares outstanding at the end of the

period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding

in the outstanding shares number.

_____________________________________________________________________________________

EBITDA Earnings before interest, taxes, depreciation and amortization. A metric that can be used to

evaluate a company's profitability. EBIT or DA independently can denote those components. Externally

reported as OIBDA (Operating Income before Depreciation and Amortization) with minor definitional

differences.

EBITDA is calculated by taking net income and adding interest, taxes, depreciation and amortization

expenses back to it. EBITDA is used to analyze a company's operating profitability before nonoperating

expenses (such as interest and "other" noncore expenses) and noncash charges (depreciation and

amortization). Factoring out interest, taxes, depreciation and amortization can make even completely

unprofitable firms appear to be fiscally healthy. A look back at the dotcoms provides countless examples

of firms that had no hope, no future and certainly no earnings, but became the darlings of the

investment world. The use of EBITDA as measure of financial health made these firms look attractive.

EBITDA numbers are easy to manipulate. If fraudulent accounting techniques are used to inflate

revenues and interest, taxes, depreciation and amortization are factored out of the equation, almost

any company will look great. EBITDA is a financial calculation that is NOT regulated by GAAP (Generally

Accepted Accounting Principles) and therefore can be manipulated to a company's own ends.

_____________________________________________________________________________________

EBITDA Margin EBITDA divided by Total Revenue. Conceptually, EBITDA Margin represents what

percentage is retained from the overall amount received. A measurement of a company's operating


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choice. Elasticity is also crucially important in any discussion of welfare distribution, in particular

consumer surplus, producer surplus, or government surplus.

_____________________________________________________________________________________

EOYEnd of Year. Sometimes referred to as EY.

_____________________________________________________________________________________

Equipment Installment Plan (EIP) Mobile Operator financing in lieu of subsidizing handsets. An iPhone

offered by an operator costs much less than buying from Apple without a data service.

_____________________________________________________________________________________

Family Branding marketing strategy that involves selling several related products under one brand

name. A family brand name is used for all products. By building customer trust and loyalty to the family

brand name, all products that use the brand can benefit.

Some good examples include brands in the food industry, including Kelloggs, Heinz and Del Monte. Of

course, the use of a family brand can also create problems if one of the products gets bad publicity or is

a failure in a market. This can damage the reputation of a whole range of brands.

_____________________________________________________________________________________

Financial Accounting Standards Board (FASB) It is a private, notforprofit organization whose primary

purpose is to develop generally accepted accounting principles (GAAP) within the United States in thepublic's interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization

responsible for setting accounting standards for public companies in the U.S. It was created in 1973,

replacing the Committee on Accounting Procedure (CAP) and the Accounting Principles Board (APB) of

the American Institute of Certified Public Accountants (AICPA).

The FASB is not a governmental body and its mission is "to establish and improve standards of financial

accounting and reporting for the guidance and education of the public, including issuers, auditors, and

users of financial information." To achieve this, FASB has five goals:

Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance

and reliability, and on the qualities of comparability and consistency.Keep standards current to reflect changes in methods of doing business and in the economy.

Consider promptly any significant areas of deficiency in financial reporting that might be improved

through standard setting.

Promote international convergence of accounting standards concurrent with improving the quality of

financial reporting.

Improve common understanding of the nature and purposes of information in financial reports.

_____________________________________________________________________________________


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Fixed Cost business expense that is not dependent on the activities of the business. They tend to be

timerelated, such as salaries or rents. An example of a fixed cost would be a company's lease on a

building. If a company has to pay $12,000 each month to cover the cost of the lease but does not

manufacture anything during the month, the lease payment is still due in full.

_____________________________________________________________________________________

Flywheel additive effect of many small initiatives. The Flywheel concept is from Jim Collins Good to

Great. It is a concept that is based on concept to apply immense force to rotate the Flywheel and it

doesn't move but perseverance to move it inch by an inch still persists. While efforts continue to apply

force to it and finally the efforts pay off by making it complete a turn. Nobody notices but the person

who is turning the wheel knows what they are up to. They continue applying force in the same direction

until it attains a speed which people stop to notice. They believe that a massive restructuring program

must have gone under to bring it to such speed.

_____________________________________________________________________________________

Forecast (FC) detailed estimate of the expected financial position and results of operations and cash

flows based on expected conditions. Forecasts are made for all GL accounts in conjunction with the

budget, and updated monthly.

_____________________________________________________________________________________

Friends & Family Mobile Network Operators plan that gives customers unlimited calling to a select

group of numbers. They are popularly known as my circle or myfaves as branded by differentoperators.

_____________________________________________________________________________________

FTE FullTime Equivalent is a way to measure a worker's involvement in a project. An FTE of 1.0 means

that the person is equivalent to a fulltime worker at 40 hours per week, while an FTE of 0.5 signals that

the worker is only halftime at 20 hours per week.

_____________________________________________________________________________________

Future Value (FV) future sum of money that a given amount of money is worth at a specified time in

the future, assuming a certain interest rate or ROI.

FV=PV (1+i) n

Where,

FV Future value

PV Present Value

i Annual interest rate

There are two ways to calculate FV:


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For an asset with simple annual interest: = Original Investment x (1+(interest rate*number of years))

For an asset with interest compounded annually: = Original Investment x ((1+interest rate)^number

of years)

_____________________________________________________________________________________

GAAP Generally Accepted Accounting Principles. The common set of accounting principles, standards

and procedures that companies use to compile their financial statements. GAAP are a combination of

authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and

reporting accounting information.

GAAP derives, in order of importance, from:

Issuances from an authoritative body designated by the American Institute of Certified Public

Accountants(AICPA) Council (for example, the Financial Accounting Standards Board Statements,AICPA Accounting Principles Board Opinions, and AICPA Accounting Research Bulletins);

AICPA issuances such as AICPA Industry Guides

Industry practice

Para-accounting literature in the form of books and articles.

_____________________________________________________________________________________

General Ledger (GL) Main accounting record of a business. It includes accounts for current assets,

fixed assets, liabilities, revenue and expense items, gains and losses. The general ledger is a summary of

all of the transactions that occur in the company. It is built up by posting transactions recorded in the

general journal. The two primary financial documents of any company are their balance sheet and the

profit and loss statement, and both of these are drawn directly from the companys general ledger. The

order of how the numerical balances appear is determined by the chart of accounts, but all entries that

are entered will appear. The general ledger accrues the balances that make up the line items on these

reports, and the changes are reflected in the profit and loss statement as well.

_____________________________________________________________________________________

Gross Adds (GA) new subscribers with a unique login ID and account combination or SIM card, a

"gross add" is the industry measure for acquiring a new customer by purchase of a plan and a phone.

The number of new subscribers, or gross adds, minus the number of customers that drop service orchurn.

Gross Adds = Beginning customers Churn + Net Adds

_____________________________________________________________________________________

Gross Margin difference between revenue and production costs, including overhead. Generally, it is

calculated as the selling price of an item, less the cost of goods sold (production or acquisition costs,

essentially).


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Gross margin = (Revenue - Cost of goods sold) / Revenue

Cost of sales (also known as cost of goods sold or COGS) includes variable costs and fixed costs directly

linked to the sale, such as material costs, labor, supplier profit, shippingin costs (cost of getting the

product to the point of sale, as opposed to shippingout costs which are not included in COGS), etc. It

does not include indirect fixed costs like office expenses, rent, administrative costs, etc.

_____________________________________________________________________________________

Halo Effect the first traits recognized influence interpretation and perception of later traits because of

expectation. The halo effect is very common among physically attractive individuals. Physically attractive

individuals are assumed to possess more socially desirable traits, live happier lives, and become more

successful than unattractive people. Edward Thorndike was the first to support the halo effect with

empirical research. Thorndikes main contribution to psychology was the creation of many theories toeducational psychology.

_____________________________________________________________________________________

Handset Seeding giveaways of handsets to developers with the expectation that they will develop

apps. For example concerned many of its developers aren't up to speed with Android 2.0, Google had

emailed studios informed them they could receive a free Motorola Droid or Nexus One handset

presently as part of the firm's Device Seeding Program. Mobile operators do the same by seeding the

market in expectation of launching a new technology, another example was seeding data capable

phones before data services were launched during GSM days.

_____________________________________________________________________________________

Hedgehog Concept a Venn diagram of three intersecting circles can be drawn for goodtogreat

companies that represent:

1. What they are deeply passionate about,2. What they can be the best in the world at3. What best drives the economic engine.

Under this concept, goodtogreat companies turn down opportunities that fail the Hedgehog test. The

Hedgehog concept is from Jim Collins Good to Great. Consistency is key in a business. Although it is

okay to change directions if the current plan is not working, this shouldn't be a common occurrence. The


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hedgehog concept shows many benefits for leaders who plan first, and then act. Consider how any

changes, no matter how small, might affect the company five or ten years from now; don't only

concentrate on the immediate benefits. Companies that have leaders following the hedgehog concept

will have a better chance of becoming great companies in the long run.

_____________________________________________________________________________________

HerfindahlHirschman Index Herfindahl Hirschman Index determines if a monopoly exists. The

calculation gives higher weight to larger firms but also allows firms outside of the top four largest to

factor into the equation. A similar index is the FourFirm Concentration Ratio, which only factors in the

four largest firms. The lower the Herfindahl Hirschman Index, the more spread out the market share

with many large firms. The higher the Herfindahl Hirschman, the more concentrated the market shares

with only a couple of large firms.

Formula:

HHI = Xi, i from 1 to n

Xi is the percent market share of firm i x 100

n is the number of firms (or 50 if more than that)

HerfindahlHirschman Index will vary with changes in market share among bigger business firms. A

market characterized by monopoly will have higher HHI. For example, if a single company dominates

(100 percent market share) then index will equal 10,000exhibiting a monopoly. In a competitive

market, with thousands of business firms competing for customers, HHI would be near zeroindicatingperfect competition. Governments worldwide use HerfindahlHirschman Index for assessing mergers. A

competitive marketplace is considered to be one with HHI lower than 1,000. On other hand, a market

with HHI of 1,800 or more is considered as highly concentrated. A market at this level has potent anti

trust concerns. Antitrust concerns are also raised when a transaction may increase market HHI by more

than 100 points.

_____________________________________________________________________________________

Horizontal Market market which meets a given need of a wide variety of industries, rather than a

specific one. The audience for horizontal markets shares characteristics across industries. Based on the

scope of horizontal markets, the marketing efforts that support them must reach this spectrum ofbuyers and prospective buyers. An Internet service provider (ISP), for example, may launch a horizontal

marketing effort to support the sale of Internet services to homeowners. This is a broad umbrella

consisting of all homeowners in a specific region. This category of homeowners represents a horizontal

market.

_____________________________________________________________________________________


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IFRS International Financial Reporting Standards (comparable to GAAP). IFRS are considered a

"principles based" set of standards in that they establish broad rules as well as dictating specific

treatments and adopted by the International Accounting Standards Board (IASB).

International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS)standards issued after 2001

International Accounting Standards (IAS)standards issued before 2001

Standing Interpretations Committee (SIC)issued before 2001

Conceptual Framework for the Preparation and Presentation of Financial Statements (2010)

_____________________________________________________________________________________

Incollects invoices sent to a carrier for calls by their subscribers that originated outside of the carriers

service area. Incollects sometimes called outroamers, are billing records that are received from othersystems for services provided to their customers that have used the services of other networks.

_____________________________________________________________________________________

Indirect Channels dealers and national retailers that sell any network operators products and

services. Indirect Channels are also known as Indirect Sales Channels or Retail Sales Partners. The

indirect channel is used by companies who do not sell their goods directly to consumers. Suppliers and

manufacturers typically use indirect channels because they exist early in the supply chain. Depending on

the industry and product, direct distribution channels have become more prevalent because of the

Internet.

Distributors, wholesalers and retailers are the primary indirect channels a company may use when

selling its products in the marketplace. Companies choose the indirect channel best suited for their

product to obtain the best market share; it also allows them to focus on producing their goods.

_____________________________________________________________________________________

Income Statement/Income Summary or Profit and Loss Statement (P&L) A financial statement for

companies that indicates how revenue is transformed into net income (the result after all revenues and

expenses have been accounted for). P&Ls can also be used to report on departments or business lines

within a company. These records provide information that shows the ability of a company to generate

profit by increasing revenue and reducing costs.

The format of the income statement or the profit and loss statement will vary according to the

complexity of the business activities. However, most companies will have the following elements in their

income statements:

Revenues and Gains

Revenues from primary activities

Revenues or income from secondary activities

Gains (e.g., gain on the sale of long-term assets, gain on lawsuits)


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Expenses and Losses

Expenses involved in primary activities

Expenses from secondary activitiesLosses (e.g., loss on the sale of long-term assets, loss on lawsuits)

_____________________________________________________________________________________

Innovators Dilemma management book by Clayton Christensen that describes how established

companies often overlook disruptive technologies. The book explains how established companies are

focused on improving a product/service for their most sophisticated customers, although this innovation

outpaces what most customers can absorb over time. Christensen describes two types of technologies:

sustaining technologies and disruptive technologies. Sustaining technologies are technologies that

improve product performance. These are technologies that most large companies are familiar with;

technologies that involve improving a product that has an established role in the market. Most large

companies are adept at turning sustaining technology challenges into achievements. Christensen claims

that large companies have problems dealing with disruptive technologies. Disruptive technologies are

"innovations that result in worse product performance, at least in the near term." They are generally

"cheaper, simpler, smaller, and, frequently, more convenient to use." Disruptive technologies occur less

frequently, but when they do, they can cause the failure of highly successful companies who are only

prepared for sustaining technologies.

Above graph shows, disruptive technologies cause problems because they do not initially satisfy the

demands of even the high end of the market. Because of that, large companies choose to overlook

disruptive technologies until they become more attractive profitwise. Disruptive technologies,

however, eventually surpass sustaining technologies in satisfying market demand with lower costs.

When this happens, large companies who did not invest in the disruptive technology sooner are left

behind. This, according to Christensen, is the "Innovator's Dilemma."

Solving the Innovator's dilemma lies in firms being able to identify, develop and successfully market

emerging, potentially disruptive technologies before they overtake the traditional sustaining technology.


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However, as described by the Innovators Dilemma, the value networks and organization structures of

these firms make it an arduous process to complete.

_____________________________________________________________________________________

Involuntary Churn percentage of customers whose service is terminated by the carrier for reasons

such as nonpayment of bill.

_____________________________________________________________________________________

JD Power Awards J.D. Power and Associates is a global marketing information services firm founded in

1968 by James David Power III. The firm conducts surveys of customer satisfaction, product quality, and

buyer behavior for industries ranging from cars to marketing and advertising firms. The firm is best

known for its customer satisfaction research on newcar quality and longterm dependability. Its service

offerings include industrywide syndicated studies, proprietary research, consulting, training, and

automotive forecasting.

J.D. Power and Associates' marketing research consists primarily of consumer surveys. The company

bears the cost of developing and administering specific surveys with sample sizes of between several

hundred and over 100,000.J.D. Power ratings are based on the survey responses of randomly selected

and/or specifically targeted consumers. J.D. Power relies on consumer reporting for study results as well

as inhouse vehicle testing for opinion based reviews in Blogs.

Although publicly known for the endorsement value of its product awards, J.D. Power obtains the

majority of its revenue from corporations that seek the data collected from J.D. Power surveys forinternal use. Companies which have used J.D. Power surveys range from automotive, cellphone, and

computer manufacturers to home builders and utility companies. To be able to use the J.D. Power logo

and to quote the survey results in advertising, companies must pay a licensing fee to J.D. Power. These

advertisement licensing fees, however, form a small part of J.D. Power's revenues.

_____________________________________________________________________________________

Journal Entry (JE) used in accounting to document a business transaction that increases funds in one

account and decreases them in another account without cash being received or a check being

processed.

_____________________________________________________________________________________

Key Performance Indicators (KPIs) Metrics (usually nonfinancial) to measure performance and help

an organization define and evaluate how successful it is, typically in terms of making progress towards

its longterm organizational goals. Key performance indicators define a set of values used to measure

against. These raw sets of values, which are fed to systems in charge of summarizing the information,

are called indicators. Quantitative indicators which can be presented as a number.

Practical indicators that interface with existing company processes.

Directional indicators specifying whether an organization is getting better or not.


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Actionable indicators are sufficiently in an organization's control to effect change.

Financial indicators used in performance measurement and when looking at an operating index.

_____________________________________________________________________________________

Keynesian perspective Keynesian principles is a school of macroeconomic thought based on the ideas

of 20thcentury English economist John Maynard Keynes. Keynesian economics argues that private

sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates

active policy responses by the public sector, including monetary policy actions by the central bank and

fiscal policy actions by the government to stabilize output over the business cycle. The theories forming

the basis of Keynesian economics were first presented in The General Theory of Employment, Interest

and Money, published in 1936. The interpretations of Keynes are contentious and several schools of

thought claim his legacy. According to Keynesian theory, some individuallyrational microeconomiclevel

actions if taken collectively by a large proportion of individuals and firms can lead to inefficientaggregate macroeconomic outcomes, wherein the economy operates below its potential output and

growth rate. Such a situation had previously been referred to by classical economists as a general glut.

There was disagreement among classical economists on whether a general glut was possible. Keynes

contended that a general glut would occur when aggregate demand for goods was insufficient, leading

to an economic downturn resulting in losses of potential output due to unnecessarily high

unemployment, which results from the defensive (or reactive) decisions of the producers. In such a

situation, government policies could be used to increase aggregate demand, thus increasing economic

activity and reducing unemployment and deflation.

Keynesian macroeconomics destroys the classical dichotomy by abandoning the assumption that wages

and prices adjust instantly to clear markets. This approach is motivated by the observation that many

nominal wages are fixed by longterm labor contracts and many product prices remain unchanged for

long periods of time. Once the inflexibility of wages and prices is admitted into a macroeconomic model,

the classical dichotomy and the irrelevance of money quickly disappear.

_____________________________________________________________________________________

Kondratiev cycles Kondratiev waves (also called supercycles, great surges, long waves, Kwaves or the

long economic cycle) are described as sinusoidallike cycles in the modern capitalist world economy.[1]

Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of

alternating periods between high sectoral growth and periods of relatively slow growth. Unlike theshortterm business cycle, the long wave of this theory is not accepted by current mainstream

economics.


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Kondratiev identified four distinct phases the economy goes through. They are a period of inflationary

growth, followed by stagflation, then deflationary growth and finally depression. Some characteristics

are as follows:

Inflationary Growth (expansion): stable to slow rising prices, low commodity prices, low and stableinterest rates, rising stock prices. The period might also be characterized by strong and growing

corporate profits and technological innovations.

Stagflation (recession): rising prices, rising commodity prices, rising interest rates, stagnant to falling

stock prices. Stagnant profits, rising debt. This period usually sees a major war that contributes to the

commodity and price inflation, and to the rising debt and misdirects business resources.

Deflationary Growth (plateau): stable to falling prices, falling commodity prices, falling interest rates,

sharply rising stock prices, profit growth but probably not as good as in the inflationary growth phase.

Sharply rising debt. Possible period of considerable technological innovation. Excess debt contributes to

speculative bubbles.

Depression (depression): falling prices, rising commodity prices (particularly gold), stable interest rates,

falling stock prices, falling profits, debt collapse. As the stock market collapses numerous scandals will

emerge. A major war occurs that helps contribute to end of the depression phase and the start of the

new expansion period.

_____________________________________________________________________________________

Lag and accelerator models The accelerator effect in economics refers to a positive effect on private

fixed investment of the growth of the market economy (measured e.g. by a change in Gross National

Product). Rising GNP (an economic boom or prosperity) implies that businesses in general see rising

profits, increased sales and cash flow, and greater use of existing capacity. This usually implies that

profit expectations and business confidence rise, encouraging businesses to build more factories and

other buildings and to install more machinery. (This expenditure is called fixed investment.) This may

lead to further growth of the economy through the stimulation of consumer incomes and purchases,

i.e., via the multiplier effect.

The accelerator effect also goes the other way: falling GNP (a recession) hurts business profits, sales,

cash flow, use of capacity and expectations. This in turn discourages fixed investment, worsening a


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recession by the multiplier effect. The accelerator effect is shown in the simple accelerator model. This

model assumes that the stock of capital goods (K) is proportional to the level of production (Y):

K= kY

This implies that if k (the capitaloutput ratio) is constant, an increase in Y requires an increase in K. That

is, net investment, In equals:

In = kY

Suppose that k = 2 (usually, k is assumed to be in (0,1)). This equation implies that if Y rises by 10, then

net investment will equal 102 = 20, as suggested by the accelerator effect. If Y then rises by only 5, the

equation implies that the level of investment will be 52 = 10. This means that the simple accelerator

model implies that fixed investment will fall if the growth of production slows. An actual fall in

production is not needed to cause investment to fall. However, such a fall in output will result if slowing

growth of production causes investment to fall, since that reduces aggregate demand. Thus, the simpleaccelerator model implies an endogenous explanation of the businesscycle downturn, the transition to

a recession.

In statistics and econometrics, a distributed lag model is a model for time series data in which a

regression equation is used to predict current values of a dependent variable based on both the current

values of an explanatory variable and the lagged (past period) values of this explanatory variable.

The starting point for a distributed lag model is an assumed structure of the form

yt = a + w0xt + w1xt 1 + w2xt 2 + ... + error term

or the form

yt = a + w0xt + w1xt 1 + w2xt 2 + ... + wnxt n + error term,

Where yt is the value at time period t of the dependent variable y, a is the intercept term to be

estimated, and wiis called the lag weight (also to be estimated) placed on the value i periods previously

of the explanatory variable x. In the first equation, the dependent variable is assumed to be affected by

values of the independent variable arbitrarily far in the past, so the number of lag weights is infinite and

the model is called an infinite distributed lag model. In the alternative, second, equation, there are only

a finite number of lag weights, indicating an assumption that there is a maximum lag beyond which

values of the independent variable do not affect the dependent variable; a model based on thisassumption is called a finite distributed lag model.

In an infinite distributed lag model, an infinite number of lag weights need to be estimated; clearly this

can be done only if some structure is assumed for the relation between the various lag weights, with the

entire infinitude of them expressible in terms of a finite number of assumed underlying parameters. In a

finite distributed lag model, the parameters could be directly estimated by ordinary least squares

(assuming the number of data points sufficiently exceeds the number of lag weights); nevertheless, such

estimation may give very imprecise results due to extreme multicollinearity among the various lagged


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values of the independent variable, so again it may be necessary to assume some structure for the

relation between the various lag weights.

The concept of distributed lag models easily generalizes to the context of more than one rightside

explanatory variable.

_____________________________________________________________________________________

Lean Enterprise production practice that seeks to eliminate any action determined to be non value

add. Lean Enterprise is often known simply as Lean,

_____________________________________________________________________________________

Long Tail Small volumes of hardtofind items can be sold to many customers. The Long Tail

phenomenon was less common before Internet sales became common. The Long Tail or long tail refersto the statistical property that a larger share of population rests within the tail of a probability

distribution than observed under a 'normal' or Gaussian distribution. A long tail distortion will arise with

the inclusion of some unusually high (or low) values which increase (decrease) the mean, skewing the

distribution to the right (or left).

The term Long Tail has gained popularity in recent times as describing the retailing strategy of selling a

large number of unique items with relatively small quantities sold of each usually in addition to selling

fewer popular items in large quantities. The Long Tail was popularized by Chris Anderson in an October

2004 Wired magazine article, in which he mentioned Amazon.com and Netflix as examples of businesses

applying this strategy. Anderson elaborated the concept in his book The Long Tail: Why the Future ofBusiness Is Selling Less of More.

_____________________________________________________________________________________

Margin difference between the selling price of a product or service and the cost of producing it.

_____________________________________________________________________________________


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M2M (Machine to Machine) technologies that allow both wireless and wired systems to communicate

with each other.

_____________________________________________________________________________________

Metcalfe effect Metcalfe's law states that the value of a telecommunications network is proportional

to the square of the number of connected users of the system (n2). First formulated in this form by

George Gilder in 1993, and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was

originally presented, circa 1980, not in terms of users, but rather of compatible communicating

devices (for example, faxes machines, telephones, etc.) Only more recently with the launch of the

internet did this law carry over to users and networks as its original intent was to describe Ethernet

purchases and connections. The law is also very much related to economics and business management,

especially with competitive companies looking to merge with one another.

Metcalfe's law characterizes many of the network effects of communication technologies and networkssuch as the Internet, social networking, and the World Wide Web. Metcalfe's Law is related to the fact

that the number of unique connections in a network of a number of nodes (n) can be expressed

mathematically as the triangular number n(n 1)/2, which is proportional to n2 asymptotically.

Websites and blogs such as Twitter, Facebook, and MySpace are the most prominent modern example

of Metcalfe's Law. Metcalfe's law is more of a heuristic or metaphor than an ironclad empirical rule. In

addition to the difficulty of quantifying the "value" of a network, the mathematical justification

measures only the potential number of contacts, i.e., the technological side of a network. However the

social utility of a network depends upon the number of nodes in contact. A good way to describe this is

"quality versus quantity."

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MMS (Multimedia Messaging Service) standard for sending multimedia content to and from mobile

phones. The most popular use is to send photographs from cameraequipped handsets.

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MOU Minutes of use and could include all allowance minutes available for calls that include any Night

& Weekend, Mobile to Mobile, Friends & Family or any other allowance.

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MRC Monthly Recurring Charge also called monthly access charge it is the set monthly cost of the plan

before additional monthly usage charges, taxes and operator surcharges.

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MVNO (Mobile Virtual Network Operator) A company that provides mobile phone service but does

not have its own network infrastructure, buys minutes wholesale from wireless companies with such

infrastructures, and retails them to its own customers. Examples are Virgin Mobile, WalMart.


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Net Adds Gross Adds minus deactivations. Incremental change in customer base over a period.

NetAdds = New Subscribers - Churn

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Net Income (NI) remaining income after adding revenue and gains and subtracting all expenses and

losses. If negative, Net Income is referred to as Net Loss.

Net Income = Net Revenue - Total Overall Expenses

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Net Income Margin (NI Margin/NIM) Net Income divided by Revenue.

Net Income Margin = Net Income/Revenue

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Net Present Value (NPV) The difference between the present value of cash inflows and the present

value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or

project.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

Formula:

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation

and returns into account. If the NPV of a prospective project is positive, it should be accepted. However,

if NPV is negative, the project should probably be rejected because cash flows will also be negative.

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Net Promoter Score (NPS) Net Promoter is a customer loyalty metric developed by (and a registered

trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It is a market research tool that uses asingle question: How likely is it that you would recommend your current provider to a friend or

colleague? Customers respond on a 0to10 point rat

Wireless Finance Terms and Reference

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