Measuring Customer level profitability & Price formation in Telcos

1. Measuring Customer Level
Profitability
&
Price Formulation in Telcos
10:25 AM 1
Pradeep Kandage
C.Eng, MIESL, NDT (UoM)

2. Tariff development elements
Tariff
Development
Is this New
offer really
attractive?
Impact of the
new offer
made on the
competitor
How much
room is there
for discounts
How do we
move my old
customers to
new rate plan
How do we
control &
optimize
costs?
What will be
the margin
2

3. Tariff development steps
Predict Impact on revenues
Provision of regulatory
environment
Competition analysis
Margin analysis for sales and costs
Optimize rate plan management
3

4. Predict Impact on revenues
Preliminary analysis before
introducing new plans
Design the best offers meeting
the company strategy
Compare them to offers made by
the competition
Check if new offers are really
attractive
4

5. Competition analysis
Identify the best strategy to
defend
Design new rate plans to beat
competitors
Find the best alternative offer
5

6. Margin analysis for sales
Accurately predicting future
margins when introducing
new plans and add-on
services
Identifying customers, plans
and profiles that produce the
highest and lowest margins
6

7. Margin analysis for cost controls
What would the effect be in
margin from switching traffic
to another provider
Whether we charge as per
the agreements
7

8. Optimize rate plan management
Decide the “best deal” we can
offer to our customers
Control consolidation of
customers into the most
important rate plans
Move our customers to the best
rate plan according to their
usage profile
8

9. Customer Level Profitability
9

10. Top-line revenue hides hidden
costs
10
Measuring revenue alone misses the big customer value
picture

11. Take a new approach to measure
profitability
EBITDA to CEBITDA (Customer Level Earnings
Before Interest, Taxes, Depreciation, and
Amortization ).
Make decisions in near-real time to increase
customer value consistently and proactively
and decrease the number of unprofitable
customers. 11
Most companies compete by lowering
their prices until the price of the
products is lowered to the point that all
of the economic profit disappears

12. CEBITDA building blocks
12

13. Customer Value Management
(CVM)
Majority of costs and revenue elements are
derived from customers’ incoming and
outgoing usage.
Inputs are needed from multiple departments
including finance, billing, sales, network,
wholesale, customer touch points, and call
center.
13
Customer category segmentation according to
the CEBITDA value and planning a differentiated
segment treatment plan.

14. Customer Value Management
(CVM) -Challenges
Main Challenge is CEBITDA calculation of network elements as its
requires an understanding of the type of traffic being transmitted across
the network
14
The simplest method is to determine the total volume of data,
minutes, and SMS transmitted over the network. By then taking
the total cost of the network from finance, we are able to define
a unit ratio to calculate cost per MB, minute, and SMS.
A more accurate method tabulates network elements against
technology and service type (FTTH/LTE/IPTV/ADSL/PSTN) and
defines the amortized cost of different network elements.
Operators are also able to identify the cost per MB, minute, and
SMS for customers connected through different technology types
by mapping the costs associated with each data/voice traffic
route.

15. Reduce costs per customer while
increasing profits with smart planning
with CEBITDA approach
15
Optimizing the cost elements and bringing
unprofitable customers to a breakeven
point.
• Migrating customers to self-service channels.
(kiosks, Online services, etc..)
• Incentivize all customers to use lower cost
channels to conduct simple transactions that do
not require human intervention.
Identify exactly which customers are
providing value to Organization and
prioritize them for treatment at high cost.
• More personalized channels.
• Value additions and Loyalty treatment

16. Challenges faced in price formulation
16
• Along with the competition, so many regulatory constrains
will be imposed.
Regulatory constraints and
competition
• As the incumbent operator, we have an opportunity in local
market. But,
• Potential for margin squeezing was reduced with
introduction of competition in the international facilities
market.
Margin squeezing by competitors
• More personalized channels.
• Value additions and Loyalty treatment
Lack of comprehensive cost/
profitability analysis

17. Digital transformation helps telcos
move from perish to flourish
17

18. Digital transformation helps
telcos move from perish to
flourish
18
• TDM interconnection to SIP transition
Technology adaptation
• Partner with media and content firms
• Partnering with OTT players
Mergers & Acquisitions
• Customer service chatbots. speech and voice services for
customers
• Network optimization and orchestration
• Predictive network maintenance/Self healing
Artificial Intelligence (AI)
• Machine to Machine (M2M) devices/Products can open up
new streams of revenue for the telcos
Internet of Things (IoT)

19. Thank You.!
10:25 AM 19