John Brooks Issue: India 2015
Article no.: 11
Topic: Tipping Point for CSPs- TM Forum Survey Report 2014 on Network Asset Management
Author: John Brooks
Title: Vice President – Product Management
Organisation: Subex
PDF size: 357KB

About author

Vice President – Product Management – John Brooks serves as the Vice President of Product Management in Subex. He has over twenty four years experience in Telecommunications, spanning Fixed, Mobile, Data, and Video technologies. With Subex (formerly Connexn/Subex Azure) since 1999, he has directed over 40 successful Cost, Revenue, and Business Optimization engagements at over 24 top-tier carriers globally, including AT&T, America Movil, BT, Vodafone, and Verizon.

Article abstract

Asset Assurance solution can find tens, and now hundreds of millions of dollars in asset recapture opportunities across an operator’s business. But the fact remains that we are finding massive sums of Capex that operators can recycle right back to the top line. 

Full Article

In 2014, it is expected that net global capital expenditures attributable to network investments and growth will exceed US$354 Billion which is up 4% from the previous year.
The unprecedented growth is driven by massive expansion in LTE rollouts and network transformations, but what is alarming to operator finance teams around the world is the lack of growth in revenues.
In 2013, for example, revenues grew by a mere 1.4%, and overall service revenue growth between 2013 and 2018 is only expected to be 1.7% CAGR.
TM Forum Asset Management team partnered with a leading B/OSS solution provider in 2013 to bring standards into the Network Capex and Network Optimization practices within operators globally. To bring attention to creating processes, controls and ultimately program standards and recommendations to help optimize the biggest capital spend line item in every operator’s budget today i.e. Network Investment, TM Forum conducted a survey in 2014.
The Network Asset Management Survey 2014 is the first ever in-depth survey of its kind. Spanning 29 operators around the world, it focused on understanding the global Capex challenges and returns on existing network investment that operators are experiencing globally.
The major premise behind this survey was by a study by PwC which revealed that a shocking 20% of assets were not returning the cost of capital; additionally it is estimated that between 5%-15% of network assets are stranded, and thus not producing any revenues for the business. Ultimately, there is now a predicted 57% drop in EBITDA for major operators in next five years which will put a critical and for many operators an unrecoverable strain on Capex.
The survey itself was targeted at both CTO and CFO organizations within operators. The reasoning behind targeting both groups was simple: Observations across operators globally have revealed more finance-led justification and analysis prior to providing Capex approvals, resulting in a need for increased collaboration between both organizations. It was therefore prudent to solicit perspectives from both, to better understand opinions, perspectives, and positions.
The understanding, commonalities, differences, and challenges faced by operators were captured, and results and insights have been produced in the final analysis that proved highly valuable to both Network and Finance organizations.
Highlights from the survey reveal:
• 65% of respondents believe that their inventory is misaligned with the network
• 75% of the respondents agreed that they are forced to perform expensive, time consuming individual site audits to get a better idea of exactly what they have deployed on their networks
• Deployed asset visibility and decommissioned asset visibility are major areas of concern for over 75% respondents
• Close to 50% of respondents from Finance and Network reach different conclusions on needs and don’t have confidence in network demand projections
• Only 50% respondents measure increase in revenue from network assets
Major findings by the study revealed more finance-led justification and analysis prior to providing Capex approvals, resulting in a need for increased collaboration between both organizations. When asked where investment priorities existed, operators overwhelmingly ranked transformation and capacity augmentation as their key initiatives.
The core questions within the survey were also designed to uncover how operators understand and track network assets within their business at any given time, at any point along the asset lifecycle. Understanding an asset involves many layers of information which is often spread across several systems and databases. As an example, a network device has a physical location; it is populated with internal equipment and software that support traffic and services; capacity within that equipment exists at both physical and logical levels. This data must be understood otherwise the operators will be forced to render a Capex spending decision without fully appreciating whether networks have stranded or under-utilized assets and where networks have exploitable capacity already available
The operators agreed that not having this level of network visibility ultimately leads to less-informed decision processes and wasteful Capex spending. A successful asset visibility program is essential to sharpen the operators’ ability to determine:
– What really needs to be procured?
– What quantity is really necessary?
– Where in the network is the need for the asset the greatest?
– When will this need become critical?
– Do re-homing or grooming options exist?
Different systems attempt to provide asset information at different points along the asset lifecycle. Enterprise Resource Planning (ERP) platforms typically maintain asset information prior to deployment, whereas Network Inventory platforms attempt to track assets once deployed within the network.
For those operators that have Inventory and/or FAR/ERP platforms, the survey by TM Forum focused on overall operator impressions and confidence in those systems. This portion was among the most enlightening when exploring the probability of inefficient network Capex practices in operators.
What we could learn from the survey is that the downward trend in revenues can be fixed through mergers, spectrum purchases, policy controls, or even government intervention. Focusing on Capex maximization is the answer to all network conundrums.
Asset Assurance solution can find tens, and now hundreds of millions of dollars in asset recapture opportunities across an operator’s business. But the fact remains that we are finding massive sums of Capex that operators can recycle right back to the top line.
As effective capital expenditure and network asset lifecycle management are rapidly becoming a big boardroom issue for telecoms operators, all functions should work together to maximize the returns from their investments. Both the CFO’s and the CTO’s teams in the telecom operator should have a holistic and collaborative view on the network asset investment.
If I have to sum up the facts and analysis in the survey, several areas of weakness and misalignment within operator Network Capital and Asset Management across the globe have been exposed. While suspected by most operators, the magnitude of the issue and the persistence of similar issues across operators have not been fully understood across the industry until now. There is agreement across the survey respondents that data quality and alignment are major problem in their businesses, as highlighted by answers received when operators were asked “what areas of Network Asset Management is a concern for you?”