Your SlideShare is downloading. ×
0
Regulatory Accounting   Peter KLUNE London, 21 st  November 2007
Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>...
<ul><li>Austria’s leading telecommunications company </li></ul><ul><li>Main business segments:  </li></ul><ul><ul><li>wire...
<ul><li>Liberalization of the Austrian telecommunications market since the beginning of 1998 </li></ul><ul><ul><li>Austria...
Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>...
Regulatory framework - wireline segment Residential customers Retail level Business customers Wholesale level Leased lines...
Different accounting rules per segment <ul><li>The  remedies  are defined specifically on a per market base (dependent on ...
Historic costs versus FL-LRIC <ul><li>Based on historic costs </li></ul><ul><li>Fully allocated costs (FAC) </li></ul><ul>...
Challenges of retail-minus approach <ul><li>Determine margin and gap </li></ul><ul><li>Monitor gap, based on changes in re...
Intern. comparison of methods in use Different types of price control methods, used in EU member countries grouped per mar...
Accounting separation <ul><li>Objective </li></ul><ul><li>Provide a higher level of detail of information than that derive...
Reporting requirements (1/2)
Reporting requirements (2/2)
Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>...
Instruments used at Telekom Austria to fulfil the various regulatory requirements FL-LRIC top down calculation USO-costing...
Model details (GAMMAxx) <ul><li>Cost input out of SAP-CO (according to IFRS) </li></ul><ul><li>Predefined cost categories ...
Cost modelling process Structuring & Design Modelling Documentation & Validation Cost Models GAMMAxx <ul><li>Definition of...
Organisational structure and resources Regulatory affairs CEO-Wireline Regulatory cost accounting team International regul...
Internal and external stakeholders Regulatory accounting and reporting internal external Product management Regulatory aut...
Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>...
Success factors of cost modelling <ul><li>Find the right level of granularity </li></ul><ul><li>Cost allocations must be r...
Issues to consider regarding regulatory reporting <ul><li>Obligation to deliver monthly data on a quarterly base makes it ...
Lessons learned – regarding relationship with authority  <ul><li>Try to establish a climate of trust and confidence </li><...
Thank you for your time Questions? Peter KLUNE Regulatory Affairs   TELEKOM AUSTRIA AG Lassallestraße 9 A-1020 Austria › ...
Appendix: helpful links and related documents <ul><li>COMMISSION RECOMMENDATION ON ACCOUNTING SEPARATION AND COST ACCOUNTI...
Upcoming SlideShare
Loading in...5
×

Regulatory Accounting

804

Published on

Regulatory accounting in the telco industry, instruments and success factors.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
804
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
19
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Regulatory Accounting"

  1. 1. Regulatory Accounting Peter KLUNE London, 21 st November 2007
  2. 2. Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>Instruments in use </li></ul><ul><li>Success factors and issues to consider </li></ul>
  3. 3. <ul><li>Austria’s leading telecommunications company </li></ul><ul><li>Main business segments: </li></ul><ul><ul><li>wireline - market share of ~ 57% </li></ul></ul><ul><ul><li>wireless - market share of ~ 39 % (in Austria) </li></ul></ul><ul><li>International operations in several eastern European countries </li></ul><ul><li>Revenues FY 06: EUR ~ 4.8 billion </li></ul><ul><li>Employees: 15,428 (end of Dec. 2006) </li></ul><ul><li>Act. market capitalization: ~ EUR 8,7 billion </li></ul><ul><li>Shareholder Structure </li></ul><ul><ul><li>Free float ~ 73% </li></ul></ul><ul><ul><li>Republic of Austria ~ 27% </li></ul></ul>Introduction of Telekom Austria Group Belarus Austria FL Slovenia Bulgaria Croatia Macedonia Serbia Kosovo Czech Republic
  4. 4. <ul><li>Liberalization of the Austrian telecommunications market since the beginning of 1998 </li></ul><ul><ul><li>Austrian telecommunications market is one of the most competitive in Europe: </li></ul></ul><ul><ul><li>With 38 fixed line providers the Austrian market is very competitive. Following the mergers of UTA&Tele2 and UPC&Inode the most important wire line market players in Austria are: Telekom Austria, Tele 2, and UPC. </li></ul></ul><ul><ul><li>With 4 mobile network operators (mobilkom austria, T-Mobile Austria/tele.ring, one, Hutchison) and 3 service providers (Yesss!, eety and eTel) Austria still has one of the highest concentrations of mobile providers in Europe. </li></ul></ul><ul><ul><li>Internet - approx. 200 service providers currently registered as ISPA members </li></ul></ul>Competitive Landscape in Austria
  5. 5. Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>Instruments in use </li></ul><ul><li>Success factors and issues to consider </li></ul>
  6. 6. Regulatory framework - wireline segment Residential customers Retail level Business customers Wholesale level Leased lines M1 Access M3 National Calls M4 Intern. Calls M11 ULL Interconnection Leased lines M8 Call origination M9 Call Termination M10 Transit services M13 Terminating segments M14 Trunk segments M2 Access M5 National Calls M6 Intern. Calls M7 Minimum set of leased lines no remedies Voice services No remedies M12 Broadband Access No remedies
  7. 7. Different accounting rules per segment <ul><li>The remedies are defined specifically on a per market base (dependent on the competitive situation and the aim of regulatory intervention) </li></ul><ul><li>This leads to different cost accounting rules per segment </li></ul><ul><ul><li>Retail level </li></ul></ul><ul><ul><ul><li>Voice Services </li></ul></ul></ul><ul><ul><ul><li>Leased lines </li></ul></ul></ul><ul><ul><li>Wholesale level </li></ul></ul><ul><ul><ul><li>Interconnection </li></ul></ul></ul><ul><ul><ul><li>ULL </li></ul></ul></ul><ul><ul><li>Broadband Access -> Retail minus </li></ul></ul><ul><li>Accounting separation obligation for all listed markets </li></ul><ul><li>Universal Service Calculation -> historic costs (but higher level of detail) </li></ul>-> FL-LRAIC -> Historic costs -> Planned costs
  8. 8. Historic costs versus FL-LRIC <ul><li>Based on historic costs </li></ul><ul><li>Fully allocated costs (FAC) </li></ul><ul><li>Usually top down modelling based on companies accounting information </li></ul><ul><li>Based on existing resources, network infrastructure and network topology </li></ul><ul><li>Cost allocation often based on activity based costing </li></ul><ul><li>Asset re-evaluation usually based on MEA concept; current cost accounting (CCA) </li></ul><ul><li>Assumptions on efficiencies (efficient service provision) </li></ul><ul><li>All costs are potentially variable (in the long run) </li></ul><ul><li>Only incremental costs are relevant </li></ul><ul><li>Usually modelled bottom up </li></ul><ul><li>Network topology </li></ul><ul><ul><li>Green field approach </li></ul></ul><ul><ul><li>Scorched node approach </li></ul></ul><ul><li>Mark-up for common costs </li></ul>HCA FL-LRIC
  9. 9. Challenges of retail-minus approach <ul><li>Determine margin and gap </li></ul><ul><li>Monitor gap, based on changes in retail pricing and/or product mix </li></ul><ul><li>Evaluate effects on gap due to permanent price changes and promotions </li></ul><ul><li>Adopt WS-pricing if necessary to ensure appropriate gap </li></ul>weighted average retail price ARPU Retail Minus ULL Bitstream avoidable costs add. costs Margin target WS-price actual WS-price GAP 1 GAP 2 weighted average wholesale price ADSL costs based on ULL business case
  10. 10. Intern. comparison of methods in use Different types of price control methods, used in EU member countries grouped per market Different types of cost bases, used in member countries grouped per market Source: Regulatory Accounting in Practice 2007, ERG Report, April 2007 Wholesale markets Retail markets Wholesale markets Retail markets
  11. 11. Accounting separation <ul><li>Objective </li></ul><ul><li>Provide a higher level of detail of information than that derived from the statutory financial statements, to prevent discrimination in favour of an operator’s own activities and to prevent unfair cross-subsidy. </li></ul><ul><li>Obligations </li></ul><ul><ul><li>Disaggregation of costs, revenues and capital employed (profit and loss statement) between regulatory entities (markets). </li></ul></ul><ul><ul><li>Provision of Volume and cost driver information </li></ul></ul><ul><ul><li>Average cost per Unit </li></ul></ul>
  12. 12. Reporting requirements (1/2)
  13. 13. Reporting requirements (2/2)
  14. 14. Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>Instruments in use </li></ul><ul><li>Success factors and issues to consider </li></ul>
  15. 15. Instruments used at Telekom Austria to fulfil the various regulatory requirements FL-LRIC top down calculation USO-costing e.g. public payphones Accounting separation Retail-minus calculation for bit-stream access One integrated core model which allows several variations FAC/HCA
  16. 16. Model details (GAMMAxx) <ul><li>Cost input out of SAP-CO (according to IFRS) </li></ul><ul><li>Predefined cost categories (labour costs, OPEX, depreciation, interest costs, direct costs) </li></ul><ul><li>Use of technical platforms (switching, ATM, IP, etc.) for cost aggregations and further allocations to products which are commonly used by controllers and technicians. </li></ul><ul><li>Platform costs are assigned to products based on a network model (usage of network elements) </li></ul><ul><li>Use product structure (product definition) used by marketing and sales people as far as possible. Specific regulatory needs (aggregation and/or disaggregation is done in a separate step </li></ul><ul><li>Cost allocation based on activity based costing. Activities and internal products are similar to the ones used by the controlling department (IT-products, customer care processes, etc.) </li></ul>
  17. 17. Cost modelling process Structuring & Design Modelling Documentation & Validation Cost Models GAMMAxx <ul><li>Definition of (output) product structure </li></ul><ul><li>Definition of technical platforms </li></ul><ul><li>Definition of activities (ABC-costing) </li></ul><ul><li>Definition of input structure (resources) and data sources </li></ul><ul><li>Setup of model structure (resources, activities and cost objects) </li></ul><ul><li>Population with cost input </li></ul><ul><li>Implementation of driver quantities </li></ul><ul><li>Documentation of modelling process (cost allcoation process, data sources, assumptions, etc.) </li></ul><ul><li>Validation of results </li></ul><ul><li>Preparation of standard reports for regulatory reporting </li></ul><ul><li>Calculation of simulations </li></ul><ul><li>Certification process (audit by NRA) </li></ul><ul><li>Utilize model for price setting, tariff applications, other legal proceedings (provide evidence of costs) </li></ul>
  18. 18. Organisational structure and resources Regulatory affairs CEO-Wireline Regulatory cost accounting team International regulation Brussels Office Wholesale regulation Retail regulation Staff position Assistance <ul><li>Information gathering </li></ul><ul><li>Participation in intern. associations and working groups </li></ul><ul><li>Lobbying </li></ul><ul><li>Benchmarking </li></ul><ul><li>Cost Modelling </li></ul><ul><li>Scenario analysis </li></ul><ul><li>Regular reporting </li></ul><ul><li>Ad hoc analysis </li></ul><ul><li>Support of legal proceedings </li></ul><ul><li>Negotiation of RUO, RIO with ANO </li></ul><ul><li>Guidance in wholesale product development </li></ul><ul><li>Tariff applications </li></ul><ul><li>Support of legal proceedings (unfair competition, etc.) </li></ul><ul><li>Guidance in retail product development </li></ul>
  19. 19. Internal and external stakeholders Regulatory accounting and reporting internal external Product management Regulatory authority Competition agency Share holders Competitors Controlling Accounting Management
  20. 20. Agenda <ul><li>Introduction of Telekom Austria Group </li></ul><ul><li>Legal framework and requirements </li></ul><ul><li>Instruments in use </li></ul><ul><li>Success factors and issues to consider </li></ul>
  21. 21. Success factors of cost modelling <ul><li>Find the right level of granularity </li></ul><ul><li>Cost allocations must be retraceable in a transparent way </li></ul><ul><li>Reconciliation of cost input with legacy system and annual report </li></ul><ul><li>Build your own regulatory model to overcome limitations of financial accounting and controlling systems and structures </li></ul><ul><li>The regulatory focus (cost causation, margin squeeze test, avoid cross subsidy, etc.) is different from controlling purposes (budgeting, plan/actual comparison, etc.) </li></ul><ul><li>Therefore build your own model but use existing structures as much as possible </li></ul><ul><li>Ensure predictability of costs and revenues (e.g. retail minus) </li></ul><ul><li>Scenario analysis must be possible (e.g. useful lifetime) </li></ul>
  22. 22. Issues to consider regarding regulatory reporting <ul><li>Obligation to deliver monthly data on a quarterly base makes it sometimes difficult to reconcile these figures with annual values. </li></ul><ul><li>Ensure consistency. Coordination with other reporting requirements such as capital market reporting is necessary </li></ul><ul><li>To provide the level of detail which is necessary, the use of different source systems is necessary. This makes reconciliation sometimes difficult. </li></ul><ul><li>NRA do collect data over a long period. Therefore actual figures must be consistent with the historic development. Graphic representation (charts) enable you to realise deviations much easier than based on huge tables </li></ul><ul><li>The usage of the data for other proceedings requires approval by TA </li></ul>
  23. 23. Lessons learned – regarding relationship with authority <ul><li>Try to establish a climate of trust and confidence </li></ul><ul><li>Develop a discussion culture </li></ul><ul><li>Discuss and agree structure of reporting, cost modelling, etc. in advance </li></ul><ul><li>Show them what they need but not more </li></ul><ul><li>Try to be at least one step ahead </li></ul><ul><li>Ensure early involvement in product development process (pricing) </li></ul>
  24. 24. Thank you for your time Questions? Peter KLUNE Regulatory Affairs TELEKOM AUSTRIA AG Lassallestraße 9 A-1020 Austria › E-Mail [email_address]  Phone +43 (0)59059 1 16012   Fax +43 (0)59059 91 16012   Mobile +43 (0)664 629 61 76
  25. 25. Appendix: helpful links and related documents <ul><li>COMMISSION RECOMMENDATION ON ACCOUNTING SEPARATION AND COST ACCOUNTING SYSTEMS UNDER THE REGULATORY FRAMEWORK FOR ELECTRONIC COMMUNICATIONS, 21.9.2005 ( http://ec.europa.eu/information_society/policy/ecomm/doc/info_centre/recomm_guidelines/acc_separ_ca/recom_en.pdf ) </li></ul><ul><li>Regulatory Accounting in Practice 2007, ERG Report, April 2007 ( http://www.erg.eu.int/documents/docs/index_en.htm ) </li></ul><ul><li>Guidelines for implementing the Commission Recommendation C (2005) 3480 on Accounting Separation & Cost Accounting Systems under the regulatory framework for electronic communications, ERG common position ERG (05)29 ( http://www.erg.eu.int/documents/docs/index_en.htm ) </li></ul><ul><li>www.telekom.at </li></ul>
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×