Revenue assurance 101

Telecom Revenue assurance 101

Ikwe Gideon [email protected]

www.datahouseconsulting.com

1 © Datahouse Consulting

mailto:[email protected]


Agenda

1 2 3 4

What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools

Who will assure revenue? 5

Key factor to consider 6


Why is Revenue Assurance Required?

• Effects of worsening market conditions

• Effects of investor pressure:

• Downgrading of debts

• Difficulty in raising capital for new projects

• Impact of billing errors on customers and trading partners

• The Nature of service render( Service is generated immediately customer place an order for call,

implies quality control must be embedded into all element of the process )

• The use of multi-systems from various vendor

• Importance of usage data integrity

• Complexity of the Billing process

• Increasing Government regulation

• Stiff Competitive Environment


What is Revenue Assurance?

• The process of measuring achieved revenue against forecasts, and accounting for any discrepancies

• The Art of finding what you didn’t know was missing

• The verification of the amount being billed

• Protecting and optimising revenues and profits

• Everything involved in ensuring that the maximum amount of revenue comes into the organisation, and

that all leakage in the system is rectified

• Any activity an organization does to ensure that processes, practices and procedures result in revenue that

is billed completely, accurately and in a timely manner

• Revenue Assurance as a discipline within a telecommunications operator is necessary because of one

apparently basic Laws of the universe.

• Which is a corollary to Murphy’s Law, states that: If something can go wrong, it will, and at the most

inconvenient moment. This is why tomato soup always splashes onto one’s only clean shirt just before an

important meeting, or the car breaks down on a lonely road when the cell phone’s battery has just gone

flat.

• Revenue Assurance cannot revoke these Natural Laws, but it can and does mitigate their malign effects.


Product

Partner management

Customer

management

Order Management & Provisioning

Network

Management & usage

Finance &

Accounting

Receivables management

Rating &

Billing

& Offer Management

Revenue Assurance

• Correct Rates • Profitable product offerings • Appropriate revenue assurance

Controls in place for new offer

• • • •

Credit assessment Timely activation Provisioning Link to tariff plan, Services and discounts • xDR leakage • Inaccurate xDRs • High usage

• Reference data management • Unbillable xDRs • Billing cycle calculation& generation of bill

existence of postings • Revenue recognition

• • • •

Payment follow-up Dunning Bad debt management Dispute resolution

• •

• •

Carecred its Churn management • Completeness &

• • • •

Dealer commissions Interconnection setup Routing Contentprovider Contract compliance

Variation Orders

In an ideal world, Revenue

Assurance encompasses

every step in the revenue

process, all the way from the

transaction to the accounting

ledger. It integrates the

Revenue Assurance process

within the overall enterprise

risk management of the

company. It covers all

revenue-related risks ranging

from revenue leakage through

to revenue recognition in the

financial statements. And it

manages people, processes,

and technology in an

integrated way to ensure

maximum revenues and

minimum costs.

Revenue Assurance Processes: an holistic approach


Enablers

Placement and empowerment in organization

Prioritized focus,

scope and frequency

Periodic reviews and

continuous monitoring Quantification

Plugging of revenue losses and process/control/system lapses Timely reporting and escalation

Preventive Detective Top-line Bottom-line

Skill set

Tools and analytics Operationalization

GOVERNANCE REVENUE RISK ASSESSMENT EVENT INDENTIFICATION IMPACT ANALYSIS

RECOVERY AND SUSTENANCE COMMUNICATION AND REPORTING Methodology

Revenue Assurance Framework Revenue Exposure

Revenue Leakage

Revenue Enhancement

Cost Saving

Technology

Process

People


The RA Process

RA COVERAGE

EXTENDED REVENUE ASSURANCE

Risk

management

Cost

management

Regulation Revenue

management reporting

Controls environment Strategy formulation

Core Revenue Assurance Objective

Minimize revenue

leakage

Scope of Revenue Assurance – what‟s in & what‟s out? Operational

support


Revenue Assurance Core Activities

• Subscription Assurance

• Usage Assurance

• Rating Assurance

• Mediation Assurance

• Billing-Postpaid Assurance

• Prepaid Assurance

• Interconnect Assurance

• Roaming Assurance

• Business insight and Intelligence

• Thirty party service Cost Assurance


Revenue Assurance Basics

The core principle for processing of data for metering and billing follow four logical steps:

Capture – recording the supply that is made

Conveyance – the transmission of data from the

point of recording the supply to the point of

presentation to the customer

Calculation – the calculation of the charge due for

the supply made

Collection – the collection of the charge due from the

consumers of the service

Revenue Assurance focuses on each of these

areas in order to detect the leakage, correct or

fix the issue and then ensure that changes are made to prevent that same issue from occurring

in future. As RA develops other areas of leakage are

identified throughout the metering and billing process. Using a mix of data Analysis and

process improvement techniques RA is able to move through the levels of maturity by striving

for continual improvement.

Data Analysis is focused upon a known

leakage and offers quantitative results that the team can monitor over time. At this point the

process improvement team are used to identify

the root cause. Process Improvement considers the end to

end process. Through this end to end

understanding of the hand offs between

processes potential revenue leakages are

identified through risk analysis techniques.

These areas are then handed over to the data

analysis team to gather quantifiable results

Capture

Conveyance

Collecti on

Monitoring and Reporting

Detect Correct Ensure

Calculation


Agenda

1 2 3 4





How to Assure Revenue • Identify key attributes of every service that is on operation that can affect revenue. • Identify the affected data sources associated with the key attributes (such as switches,

mediation components, roaming clearinghouses and interconnect operators). • Map the data sources to the information model. • Identify the data flows across the data sources, identify the location of the data sources

and to where the data is being send from each of these data sources. • Define controls to ensure the integrity of data related to revenue, across all data flows. • Define thresholds for loss at each point. This should be derived from the target threshold

on an end to end reconciliation, thresholds such as rejection tolerance and time to receive

CDRs. • Devise a mechanism to cross check with the first point to the last point in the data flow

(switch to billing system).


Questions RA Ask…

• How much usage is recorded by your network?

• Is all usage being billed?

• Are all customers on the correct tariff?

• Are all tariffs been implemented correctly?

• Any unauthorized usage taking place?

• Do you know who is using your network?

• Are traffic and charges with partners correct?

• Is traffic being routed most cost effectively?

• Are you getting best prices from your third party services?

• Are your products profitable?

• Identify products and services

• Establish how services can be used

• Understand network implementation

• How and where usage data is generated

• Which end systems require what information

• Determine usage data flows

• Determine accuracy of end-to-end billing chain

• Independent analysis of raw usage data

• Data reconciliation with billing statistics

• Identify discrepancies

• Derive revenue impact

• Build business case

Fundamental RA Strategies

• Network usage with billing accounts database

• Network usage with retail billing statistics

• Network usage data with interconnect settlement

• Network roaming network usage with TAP-out/in

• TAP-in with billing statistics

• Orders database with HLR and billing

• Switch statistics with network usage data

• Signalling information with network usage data

• Trend analysis

Basic Reconciliation

Approach


Agenda

1 2 3 4





Sources of Revenue Leakage?


Product and offer management, Sales Order management and provisioning Risk

• Lack of revenue assurance checks/testing prior to new product/service launch

• Non adherence to change management process

• Product and services not designed to address all known and potential fraud risks and revenue leakage risks

• Lack of post launch assessments and reviews to assess the impact of new products and services

• Tariffs communicated to the customers through brochures, marketing campaigns or through websites different from the billing system

• promotion schemes design/implementation issues may lead to dealer commission fraud, subscription fraud and high acquisition cost

• Zero minutes of usage subscribers in the network indicating dubious connections

• First bill defaulters indicating subscription frauds

• False promises by the sales team leading to customer dissatisfaction resulting in disputes

• Allocation of subsidized plans to subscriber’s not entitled to same

• Inactive recharge vouchers (RCV) floating in the market

• High quantity of active stock lying at warehouse of recharge vouchers

• Lack of related number process at the time of sales (subscribers with bad-debt / fraud history re-entering the system

• Subscribers provisioned in the billing system improperly provisioned in the network elements

• Calls, SMS and other services (other than content billing) allowed to subscribers after termination date of the subscriber in the billing system

• Customer provisioned on Postpaid billing but not on HLR and vice versa

• Customer provisioned (configured) on HLR but not on IN and vice versa

• IN (Camel) parameters not assigned for each MSISDN number on the switch

• Subscribers with inadequate balance in the IN allowed to make a call or send SMS

• Customer profile in HLR does not match with profile configured on IN and Postpaid system (e.g. customer has opted for GPRS, same does not reflect on HLR)

• Subscribers given access to premium services against the business rules e.g. international roaming, international access

• Incorrect bill plan allocation


Network management and usage Risk

• CDRs may not be generated for all

billable calls, SMS and other services

• Parameter on the switch for maximum

duration for calls and other services

allowed in the IN Platform / GGSN and

the Switch may not be in line with policies

of the company

• Switch may not be sending/skipping the

signal to the IN (SCP/STP) which is

required to ascertain whether the

subscriber has adequate balance

• IN may be incorrectly computing the

maximum available call time

• Switch not disconnecting the call after the

call time is equal to the maximum allowed

time intimated by the IN Platform for each

call

• Signaling of call related information by

the IN to the Switch and vice versa when

the call is commenced and ended may be

incorrect or not proper

• Incomplete capture of call details

• Incorrect configuration of destination and

short codes

• Incorrect B-Table configuration

• Not all Billable CDRs are generated by the

switch

• Not all CDRs are transmitted from switch to

mediation

• Delay or no transmission of TT files between

switch to mediation

• No transmission of TT files between switch

to mediation

• No site level redundancy for critical network

elements

• High Network downtime of network

elements like MSC, SCP, STP, BSC etc.

• High network downtime of billing systems

like SDP

• Baseline configurations for the switch and

other critical network elements are not

formally defined

• Inadequate controls over users for switch

management (e.g. user accounts of former

employees still active)

• Inadequate storage capacity of switch and

mediation devices which may lead to loss of

CDRs

•

• Sub optimal call routing

• OSS traffic may not be encrypted, hence

confidentiality and integrity may be

compromised

• IMSI information may not be encrypted

• Network administrators may not monitor

the OSS network logs for any unauthorized

activity.

• Clocks not synchronized across switches

and other network elements

(IN/SGSN/SMSC)

• Duration mismatches in switch and IN/

Billing system time

• Millisecond calls not rounded up

• B-Party answered calls with zero duration

may not be charged


Rating and billing Risk

• CDRs for all calls, SMS and other

services before the cut-off date may not be

received in Mediation device from the

switch.

• Billable postpaid mobile CDRs may be

skipped during processing through the

mediation filter

• Billable CDRs may be skipped during

processing through the Data capture filter

in the billing system.

• Duplicate CDRs may be billed to

subscribers

• Price plans being maintained in the billing

system may be incorrect

• All destinations may not be maintained in

the billing system

• Price plans in the Billing system may not

authorized/approved

• All billable calls may not be rated

• Subscribers may not be assigned to the

correct price plan

• Rating algorithm may incorrectly compute

charges for each call, SMS and other

services

• Roaming subscriber not being charged for

the roaming calls

•

• Revenue for content services maybe

incorrectly computed and deducted from the

subscribers balance

• Customers may be invoiced beyond the

legally billable limit

• Services, subscriptions, other charges and

adjustments including discounts for the

invoice period may be incorrectly extracted

for invoicing (including content billing)

• All billable subscribers may not be invoiced

• All invoices may not be received by the final

customer

• Revenue, accounts receivable and accrued

income in the accounting system may not

reflect in the billing reports

• Revenue for the period may not be accrued

based on actual usage during the reporting

period

• All unprocessed CDRs are not corrected and

reprocessed in a timely manner

• Calls not being charged as per the tariff plan

– local on net, local off net, international

calls, etc.

• Customer not being invoiced for the

chargeable calls

• Adjustments to customers may not be

authorized

• Bonus adjustments and credits incorrectly

calculated

• Prepaid trigger to restrict at defined

thresholds working inappropriately

• Balance updated on recharge more/less than

the voucher value

• Balance transferred by subscriber is not

equal to balance received by destination

• Peer to peer transaction allowed when

source and destination are same which may

result in increase of balance of source

MSISDN

• Round up error of duration recorded at

switch and IN (e.g. actual duration of call

recorded at switch may be 5 seconds, but

that recorded at IN may be 4 seconds)

• Peak time calls being charged at non-peak

time rates

• Call charge exceeds the subscriber balance

and the same does not reflect as a negative

balance

• On net calls being charged off net rates and

vice versa

• Incorrect setting for concessional

/discounted billing schemes

• No real time rating of SMS CDRs causing

negative balances

• No reconciliation between MoU as per the

switch and billing system

• Whether you have adequate control over

exchanged test SIMs, TAP-In and TAP-Out

files

Collection , adjustments, Finance and accounting Risk

• Subscribers whose services have been

barred due to crossed credit limit are

allowed by customer care to continue

services without paying bills

• More CUG/FnF numbers are added for

subscribers from the back end by

customer care

• No timely action on the inconsistencies in

the number of subscribers per the billing

system and switch

• Inaccurate reconciliation of MoU between

the switch and the billing system

• High usage customers not being

monitored

• High usage roaming customers not being

monitored

• Uncommon trend in calling pattern of a

subscriber not generating an alarm

• Calls to barred/disputed countries not

being monitored

• Infrequent monitoring of credit limits

assigned to subscribers

• Credit limit to a subscriber is higher/lower

than the policy defined

•

• Documentary proof for calculation of credit

limits not in order

• Customer not barred on reaching stipulated

credit limit

• Non monitoring of customers failing to make

the bill payment

• No follow ups for defaulted customers (e.g.

no reminder Sms, no outbound calling, etc...)

• Adjustment/waiver passed more than the

stipulated limit

• Adjustment/waiver type passed not as per the

policy

• High outstanding of interconnect operators

(e.g. an invoice has not been paid by an

interconnect partner for more than 180 days)

• Recharge by a customer not reflected in his

balance

• Adjustment/waiver type passed not as per the

policy

• High outstanding of interconnect operators

(e.g. an invoice has not been paid by an

interconnect partner for more than 180 days)

• Recharge by a customer not reflected in his

balance

• Usage incorrectly captured in the revenue

report

• Component balances for prepaid accounts

erroneously calculated

• Deferred revenue balance incorrectly

calculated

• Roaming revenue inaccurately calculated

• Interconnect expense and revenue not

captured correctly

• No allowance or wrong provision for bad

debts

Examples of Potential Causes of Leakage

Likely Network Problems

• Missing A numbers

• Missing records & Clock drift

• Failure to track customer activities properly

• Inaccurate recording of call duration

• Itemised billing not activated

• Routing prefixes

• Unexpected records

• Switch restarts

• Communication failures

• Non optimal routing

Likely Billing Problems

• Maximum call duration

• Poor Suspense Management & Late Billing

• Billing the wrong element(volume rather than duration)

• Multiple billing for the same call

• Long duration calls discarded

• Network terminated calls discarded

• Incorrect tariff applied

• Tariff not implemented correctly

• Customers not linked to billing accounts

Likely Mediation Problems

• Failure to filter records correctly

• Failure to balance batches

• Failure to clear suspense

• Incorrect application of customer identifiers

• Incorrect formating of CDr’s

• Dropped records

• Duplicate Records

• Removal of billable records

Mis-identification of call type

Out of date reference tables

Likely Collection/Dunning Problems

• Failure to track old account

• Misapplication of credit

• Inefficient dunning practices & policies

• Failure to feed back dunning lessons to marketing, sales and product planning

• Credit policy management

• Errors on transfer from billing to A/R.GL

Likely Sales and Marketing Problem

• Over promising, too many special request

• Pricing below target Margin, excessive discount

• Poor product specification-cannot bill products/Poor contracts

• Sales to cash process breakdown

• Abuse of shortcut or fast track processes

• Contract terms not passed correctly to billing

• Incorrect notification of billing start

Likely Product development Problems

• Failure to plan for rate-plan update to billing

• Failure to build transaction collection mechanism into the start phase of product rollout

• Failure to include the cost of billing into the estimate of cost of product introduction

21

Ranking of Sources of Revenue Leakage

7

Revenue leakage occurs mainly

around the core Revenue Assurance

processes. The survey conducted by the leading

consulting firm where respondents‟ (64

operators world wide) key concerns in

this context remain the absence of

adequate controls and procedures and

the loss of data in the revenue cycle.

Data loss between systems and the

implementation of new products and

services are also important sources of

leakage.

Medium

Lack of process control and procedures Data loss between systems New products/services Rating errors Tariff changes System failure Fraud (all types) Routing and reference data errors Issue with XDR integrity Low Source: Global revenue assurance survey by Ernst & Young, 2009


Percentage Loss of Revenue Leakage Telecom operators are confronted with massive data sets and data flows that support their

billing processes. As these billing processes are typically highly automated processes

supported by multiple and complex systems, loss of data integrity during transfers and

100%

95%

Opportunity losses Billable

Events

Billed Revenue

90% Collectible

Services not billed or mis- billed

Correct Charge Adjustment

4%

4%

1%

1% Allowance

Adjustments (Disputes)

3% Write-offs

(Bad debt)

1% Fraud

Uncollectible Expenses

Cash Flow

processing can occur and lead to unreliable data flows. Potential Revenue Opportunity

104%

All Attempted Events

Numbers are illustrative

Revenue Typically gap: 2%-15% Source: Global revenue assurance survey by Ernst & Young, 2009


Revenue leakage (including fraud-related) across the revenue chain remains a

challenge for operators. While operators in

developing markets face a wide range of

issues including the upfront challenge of high

revenue leakages, operators in developed

markets are faced with insufficient data to

accurately identify and recover most of the

estimated leakages.

The survey conducted by the leading consulting firm where respondents‟ were

asked about estimated revenue leakage in

their operations, 54 percent of RA Heads

indicated that revenue leakage was greater

than 1 percent of total revenue (excluding fraud), and 15 percent indicated revenue

leakage of greater than 3 percent. Some

respondents in Africa acknowledged revenue

leakage greater than 10 percent.

30%

17% 17% 18%

0% 10% 20% 30% 40% 50% 60% 70%

Europ and America ASPAC Africa and Middle East

% of fraud leakage

% of revenue leakage 58% 61%

Leakage – Estimated, Identified and Recovered % of respondents with revenue and fraud leakage greater than 1%

18%

29%

23%

41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Africa and Middle East

ASPAC

% of respondents with no information on leakage estimation % of fraud leakages

% of revenue leakages

37% Europ and America 5%

Source: Global revenue assurance survey by KPMG, 2009 24

regions.

Forty percent of respondents estimated that less than half of the total leakage is

identified by the RA function.

Sixty percent of respondents estimated that less than half of identified leakage is

recovered from subscriber or partner

billing. More than one-quarter of respondents

did not have information to estimate the

percentage of actual leakages identified.

Leakage identification seemed a bigger

challenge in developing markets where

large numbers of respondents from Africa, the Middle East, and the Asia-Pacific

region indicated identification of less than

10 percent of estimated leakages. But while identification of leakages is a hurdle

for a handful of operators, recovery of

leakages is a challenge across all

10% 10%

30%

44% 50% 81%

50%

40%

30%

20%

10%

0%

70%

60%

100%

90%

80%

28% 0%

28% Africa and Middle East ASPAC

19% 0% Europe and America

% Greater than 50% 25-50% 10-25% Less than 10%

Leakage – Estimated, Identified and Recovered (cont‟d) Regional breakdown of revenue leakage identified

55% 23%

0% 23%

35% 12%

24% 29%

63% 5%

5%

26%

0%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Africa and Middle East ASPAC Europe and America

Regional breakdown of revenue leakage identified

% Greater than 50% 25-50% 10-25% Less than 1 Source: Global revenue assurance survey by KPMG, 2009

25

Revenue Leakage - Conclusion • For the majority of operators, recovery of leakages ranged from 2.5 percent up to 37.5 percent of the total estimated revenue leakage. This indicates that a large portion of revenue

leakage remains un-recovered. Although revenue leakage worldwide was generally 1-3

percent of revenues, the quantum of this loss even at this miniscule percentage is significant. • It is imperative for operators to assess the complete life cycle of capturing leakage data,

identifying the leakages and recovering them. Timeliness is also critical since leakages

recovered over an extended period of time are less likely to realize the potential value. As the

time between the leakage and recovery increases, the probability and size of the recovery

may decline. 1% revenue leakage over one billion of revenue is still 10 million.


Agenda

1 2 3 4




27

Average Balanced Mix of KPIs Utilized It is good practice to have a well-

balanced set of KPIs covering four

aspects:

• revenue leakage

•

• •

data quality

Revenue Assurance

management

control efficiency and

effectiveness.

Most operators cite Revenue

Assurance KPIs around revenue

leakage.

Data quality KPIs are also used by

many operators (27% of KPIs

monitored). But KPIs around

Revenue Assurance management (6% of KPIs monitored) and

process and control efficiency and

effectiveness (10% of KPIs monitored) are not widely used.

Data Quality

Measuring the validity,

accuracy and coherency within the operational

systems and databases, eg., misaligned

customer records/total

customer records

Revenue Leakage

Measuring the implication of revenue

leakage on the bottom

line, eg., recovered and

billed records/total billed records

RA Management

Measuring the efficiency

and effectiveness (result oriented) of RA

organization and RA

practices, eg., solved

RA incidents/total RA

incidents

Process and Control Efficiency and

Effectiveness

Measuring the efficiency

and effectiveness (result oriented) of individual

controls, eg., value of

cases from control

X/total RA cases value

RA KPIs

27% 57%

10% 6%

Source: Global revenue assurance survey by Ernst & Young, 2009

28

Measurement via KPIs is common practice:

• Almost all participants use KPIs. With a focus on all kind of data records

(„xDRs‟) leakage, rating, and billing errors:

• •

The number one KPI is total revenue

leakage.

Rating and billing errors are closely

•

followed up.

Quantity of xDRs recovered or recycled is

also used.

• However, only 13% of respondents

mention average revenue per user

(„ARPU‟) as a KPI in the Revenue Assurance context. Balanced scorecard and benchmarking are

not widely used:

• •

Only 21% use a balanced scorecard. Benchmarking is not widespread, due to a

lack of relevant benchmarks.

Revenue Assurance‟s Performance is Measured

Mainly via Revenue Leakage KPIs

10

0

50

40

30

20

Revenue Loss Reported Value

XDRs Written Off Billing Errors Rating Errors XDRs in Suspense and Errors

KPIs monitored by the RA function

30

20

10

0

KPIs Audits (Internal) Audits (External)

Bench-marking Balanced Scorecard

Others Not Formally Measuring

Indications in place measuring Revenue Assurance

effectiveness

%100

90

80

70

60

% 90

80

70

60

50

40

Source: Global revenue assurance survey by Ernst & Young, 2009 29

% of revenue

Operators‟ targets vary by geographical area, but are commonly about 1%: The leakage acceptance spectrum is wide –

operators in Central and Latin America tolerate leakage of only 0.51%, while those in

the Middle East accept an average of 1.75%

– based on our respondents.

Acceptance of revenue leakage also

varies by maturity level:

Less mature operators target leakage of

1.5% on average, while mature operators

accept less than 0.5%. …but 1% of a lot of revenue is still a

lot of money: 1% of US$1 billion is still US$10 million; so

operators still have room for further efforts to

reduce leakage.

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

Middle East North America Asia Average South-East Europe Western Europe Africa Americas

1.8 2 % of revenue

The Average Leakage Reduction Target is 1% Level of accepted revenue leakage

Average accepted revenue leakage by maturity level

1.80

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

M1 M2 M3 M4 M5


Revenue Assurance Technologies/Systems/Tools

Leading practice tools RA Software Test Call Generator (TCG) Fraud Management System (FMS) Probes Data warehouse (DWH)

Typical controls performed with the tool Trend analysis

Switch to bill reconciliation

Provisioning reconciliations

Independent Revenue Reporting Test calling with CDR generation and rating validation Near real time usage monitoring

Traffic pattern analysis Generating independent traffic records which could be

reconciled with CDRs Reconciliations

Trend analysis

31

During the survey conducted by the

leading consulting firm, the

responses made from the all the

respondents in the context of revenue assurance automation within their

own company were analyzed and

connected with the firms‟ best

practice which is showing clear

distinction between the manual and

automated controls of the major

revenue assurance domain.

Revenue Assurance Automation

40 30

20

10

0

50

70 60

80 % Manual + data warehouse

% Auto (in-house or commercial software)

%

Product and Offer

Management

Order

and

Network Management Management

and Usage

Rating and Billing

Receivables management

Finance and Customer Accounting Management

Partner Management

Provisioning Source: Global revenue assurance survey by Ernst & Young, 2009


33

OPEX RATIO

OPEX and CAPEX Analysis

• Opex per total subscriber connection

• Opex per Minute

• Opex per site

• Opex % of revenue

• Service Opex (Customer Care &

Billing, Service Creation &

Administration) as % Revenue

• Network Operating Cost as %

Revenue

• Marketing Opex/Gross Connection

• Marketing Opex/Net Connection

• Rental as % Network Opex

• Power & Fuel as % Network Opex

• Repair & Maintenance as %Network

Opex

• Transmission as % Network Opex

• Core Network as % Network Opex

OPEX and CAPEX Analysis

34

CAPEX RATIO

• Capex (% Revenue)

• Capex per total connection

• Capex per Minute

• Capex per Site

• Capex-MSC/ Subs

• Capex-BTS/ Subs

• Gross Capex ( Gross Fixed Assets

+ Incremental Capex)

• Spectrum Charges as % Revenue

• License Fee as % Revenue

• Capex (Intelligent network)/Prepaid Revenue

• Capex (Core Network-Voice, SMS excluding Data)/Total Revenue

• Capex (core Network-Data)/Data Revenue

• IT infrastrucrure /Total Revenue

• Transmission Backbone/Total Revenue

• Product related CAPEX/Revenue from Product

35

Marketing and Sales

Operating Efficiency

Growth Performance, Quality and Coverage

Financial and Revenue

Usage and Subscriber

Financials

• Gearing ( net Debt/ EBIDTA)

• EBIDTA % Revenue ,PAT % Revenue

• ROIC (EBIDTA/ Gross Capex)

• FCF (EBIDTA – Capex –Tax) % Revenue

• Capital Productivity (Revenue / Gross Capex)

• P/E

Revenue

• ARPU ( Average Revenue Per User)

• ARPU Segmentation: Voice , Data , Aggregate

• ARPU Segmentation: Prepaid, Post-paid , Blended

• ARPM (Average Revenue Per Minute)

• ARPM Segmentation: Prepaid , Post-paid , Blended

• Average Revenue Per Call

• Average Revenue Per Cell Site

• Average Revenue Per Employee

• Revenue Breakup (%)

• Access: Connection, Subscription

• Wireless Voice

• Data ,Internet,Interconnect

• Roaming , International Roaming Revenue

70+ Key Telecom Financial and Management KPI’s

36

Marketing and Sales





• Subscriber Acquisition Cost (SAC ) : Dealer Commission, Terminal Subsidy, Sales, Marketing, Distribution cost • SAC as % Revenue • SAC / net Addition • SAC / Minute

• Sales Outlet • Company Owned Sales Outlet • Number of Retail Outlets or Point of Presence

(POP) • Customer segmentation • Analysis of subscriptions • Top N customers • Churn (No. of Subscriber who stopped using Services

or left particular network) • Total Subs • Subs Segmentation: Prepaid, Post Paid • Churn per month per segments • Subscriber per Employee (13,000) • Subs Share • Revenue Market Share • Minutes Market Share


37

Marketing and Sales





• Number of BTS Sites • Number of MSC Sites • Number of Employees • MSC/ Subs • MSC/ BTS • BTS/ Subs (1000) • BTS/ Km2 • Spectrum Charges as % Revenue • License Fee as % Revenue • Interconnect Cost as % Revenue • Labour Cost (% Revenue) • OSS/ BSS Ratio • Share of Net Adds Subs • Share of Incremental Revenue • Quarterly Sites Added • MRPU ( Marginal Revenue Per User) • Growth

• Subs Growth • Revenue Growth • Services Revenue Growth • Services Revenue Acceleration • ARPU Growth • ARPM Growth

• Subs Added / Retail Point of Presence (POP)


38

Marketing and Sales




Subscriber Usage

Usage • Minutes of Usage (MOU)

• MOU Segmentation: Prepaid , Post-paid , Aggregate • MOU Segmentation: Incoming, Outgoing , Aggregate

• Number of Outgoing SMS Per Sub Per Month • Minutes Carried Per Month (MON) • Number of recharges per subscriber • Average Data usage per subscriber per month( MB) • % Airtime Capacity Utilization • Minutes Per Site • Number of Calls • Number of Calls per Subscriber • Average Call Duration • Roaming Minutes • International Roaming Minutes • International Roaming Minutes Segmentation: Incoming ,

Outgoing • Top 50% Users Revenue % • Top 50% Sites Revenue %


39

Marketing and Sales


Quality and Coverage


Subscriber Usage

Coverage and Spread • Towns ,Area and Population Covered • % Traffic Within Own Mobile • Service Performance

• RTT Delay (Ms) (800) • Application Through Put ( kbps) (25 Kbps) • Call Setup Time

• Network Congestion Point of Interconnection (POI) Congestion (<0.5%) • Connection Establishment (Accessibility)

• Call Setup Success Rate (CSSR) (>95%) • Standalone Dedicated Control Channel (SDCCH) Congestion

(<1%) • TDH Congestion (<2%)

• Connection Maintenance (Retain ability) • Call Drop Rate (CDR) (< 2%) • Worst Affected Cells for Call Drop Rate (<5%) • Connection with Good voice quality (>95%)

• Service Quality • Prepaid – Prepaid Service Success Rate • Number Portability – Drop Rate • Handover Success Rate

• Network Availability • BTSs Accumulated downtime (<2%) • Worst Affected BTSs due to downtime (<2%)

• % of open and Closed and level of escalation priority required • Mean time to resolved • Work in progress & Customer service level statistics


40

Marketing and Sales


Country Telecom Sector


Subscriber Usage

• Penetration • Penetration ( >5Years Population) • Penetration per House Hold • Top 2 Players Share • Top 2 Players Share Change • HHI Index • Pricing Long Distance/ Local Price Ratio • Average F2M Interconnect Rate • Average M2M Interconnect Rate • Sim/ User ( Number of Subscribers/ Number of

handset Sales) • ARPU ARPU % of disposable income • Mobile Revenue/ GDP • Regional Roaming Usage (Roaming Travelers / Intra

Regional Travelers) • Subs/Km2/MHz • Subs/Km2 (Urban) • Spectrum per Operator (MHz)


Agenda

1 2 3 4




41

Revenue Assurance Organization

Objective

To provide and sustain an effective enterprise-wide process that will independently

confirm the end-to-end completeness, accuracy, integrity and timely capture, billing and

reporting of all revenue generating events; while identifying emerging revenue risks

and/or opportunities with a view to mitigating/exploiting same.

42

Where should the Revenue Assurance function sit within the organization?

How many people should there be within the Revenue Assurance organization?

What should RA‟s relationship be with functions such as fraud, internal audit, risk management, finance,

billing, and customer relationship management?

What should the organizational structure look like?

What type of roles and skills should there be in the team?

How can we build cultural awareness by linking RA‟s performance to wider Group targets?

Unfortunately there is no one-size-fits-all answer to these questions:

The objectives set for the Revenue Assurance function, together with the characteristics of the organization as a whole, will shape the appropriate structure. The nature of the RA organization will be influenced by

factors including: • size of the organization

• existing structure of the organization

• risk culture

• group structure

• initial start-up point (where was it initiated?)

• executive sponsorship

• regulatory requirements.

The Revenue Assurance Organization: Insight How to structure a Revenue Assurance organization to achieve success?

Many operators continue to struggle with questions such as these:


Governance Revenue analytics & control execution

Project team(s)

• Risk assessment

• Strategy development

• Developing policies and procedures

• Compliance monitoring

• Management

• Follow up on trends

• Revenue forecasting

• Root cause analysis differences between

forecast and actual

• Day-to-day control execution

• Special project team(s) to run larger

RA or Fraud projects

such as

implementation of

RAS and FMS

Diagnostic

reporting Core RA team

Ad hoc team

• Building new controls

• Investigating RA issues and perform

root cause analysis

• Assist in risk assessment

Fraud management

• Managing the telecommunication

fraud aspects

Who will Assure Revenue? Revenue Assurance Department RA Director


Revenue Assurance Function Maturity Levels

Strategy

Process

and tools

Maturity Level 1 Early

•No formalized

strategy and limited

RA influence

Maturity Level 2 Recurring

•No formalized

strategy, but some

RA successes

Maturity Level 3 Established

•Formalized strategy

and influence at

executive level

Maturity Level 4 Administered

•Formalized

strategy with

strategic papers

and elements of

group integration

Maturity Level 5 Optimized

•Strategy is risk-

based, includes

cost reduction

parameters, and is

integrated within the

group

•Undefined RA structure. Limited to

isolated and

personal initiatives

Organization •Small team not focusing exclusively on RA activities

•Early formalization of the RA function,

but with low

influence

•Skillset in development

•Defined and recognizable team

focusing on RA

activities

•Availability of multidisciplinary

skills. Training on

an ad hoc basis

•RA activities are spread into the

organization and

monitored by the RA

team

•RA staff have key technical skills and

subject matter

expertise. Training

budgets are available

•RA primarily undertakes a

monitoring and

advisory role

•RA staff also have accounting and

auditing skills.

Formal training and

skills optimization

plans are in place

•Reactive and instinct-based RA

activities. Only basic

RA tasks •Substantial manual

effort and end-user

computing tools only

•Basic revenue leakage-related

tasks performed

•Automation remains fragmented

•Major RA process covered

•Some automated RA processes

•All revenue leakage and fraud processes

are covered

•Tools are widely available

•All RA processes are covered

•Optimized automation of RA

tasks

45

During the survey conducted by the leading consulting firm, the

responses made from the all the

respondents in the context of revenue

assurance function maturity level

automation within their own company

were analyzed in the combination of

the operators‟ own self-assessments

from the survey questionnaire, with a

comparative analysis ranking

respondents versus the maturity

model.

And it evident from the chart that 73%

of the revenue assurance functions with in the respondents from around

the world were rated between the

maturity level 2 and 4.

2

3

7

18

17

12

3

2

0

5

10

15

20

M1 M2 M3 M4 M5

Revenue Assurance Function Maturity Levels (cont‟d) Number of

respondents

Maturity level Source: Global revenue assurance survey by Ernst & Young, 2009


The Revenue Assurance Strategy: Insight Why have a strategy? The need for a Revenue Assurance strategy which is in line with, and integrated into, the overall risk management framework of an organization should be an obvious point. By having

a documented and publicized strategy, the goals and purpose of the Revenue Assurance

function help other departments within the business clearly understand what Revenue

Assurance is trying to achieve and why Revenue Assurance should be embedded into the

operating processes of the business. This understanding is critical in delivering improved revenue capture, as without buy-in to the strategy, the goals of Revenue Assurance will simply not be achieved.


In its early stages, Revenue

Assurance tends to focus on revenue

80% 60% 40% 20% 0%

Revenue Assurance Strategy 100%

M1 M2 M3 M4 M5

leakage and fraud. As it becomes more mature, Revenue Assurance

Profitability enhancement gets increasingly involved in cost reduction matters. Cost reduction Fraud Revenue leakage

Maturity level

Source: Global revenue assurance survey by Ernst & Young, 2009

48

The Revenue Assurance Function is well empowered

within the Organization Reporting line of the RA function

Reporting to the CFO or CEO gives Revenue

Assurance access to senior management:

• In most organizations, Revenue Assurance sits under the finance function and reports directly to

the CFO.

• Championing of Revenue Assurance by the CEO/CFO is crucial to its success. In some

organizations, changes in sponsorship however

continue to affect RA‟s influence across the business.

…But Revenue Assurance managers still cite

influence as a key challenge:

• Although most Revenue Assurance managers are

CFO -2 levels and above, almost half cite their lack

of influence as a key challenge.

Chief Financial Officer

Chief InformationOfficer/IT Director

Headof Internal Audit/Audit

Committee

Chief Executive Officer

Risk and Compliance Manager

Billing Manager

Chief Technical Officer Revenue Assurance function positioning in

the C-Suite organization

Same level Level -1

Level -2

Below level -2

4% 6%

2%

4% 6% 12%

66%

43%

40%

13%

4%


Two conflicting factors impact Revenue Assurance's

positioning:

The need for across departments influence

…And the sometime inadequate hierarchical

positioning of Revenue Assurance within the organization which could limit RA‟s ability of action.

Technical departments (billing, IT, network) are key

collaborators, together with Finance.

It is believed that Revenue Assurance should:

Operate as a subset of enterprise risk

management

…And benefit from formal links with the internal

audit, risk management and compliance functions.

More mature RA functions maintain strong ties and

synergies with other risk management functions.

0 10 20 30 40 50 60 70 80 90 100

Other

Customer care Internal Audit Sales and Marketing Risk and Compliance Regulatory

Finance

Billing IT Network operations

Involved

Ad hoc

Collaboration with Other Departments is Progressing,

But Challenges Remain Collaboration level with the RA function

Source: Global revenue assurance survey by Ernst & Young, 2009 Less than 40% of respondents have a

continuous relationship with internal audit, less

than 30% with risk and compliance, and less

than 20% with regulatory functions. This lack of

linkage makes it harder to implement a risk-

based Revenue Assurance strategy.

50

People Capabilities of Revenue Assurance What determines RA skills needs?

The wider the product mix, the greater the need for a mixed skills group

The more skills, the greater the size of the department and the greater the need for multiple

applications in order to provide coverage and assurance across the various product streams

Do you have to be able to respond quickly and adapt to constant change?

Do you need to ensure an appropriate presence and input at senior Level and across various

Change forums?

51

Billing, IT and Technical are Revenue Assurance

teams‟ key skills: Around 75% of respondents have expertise in billing solutions and network, traffic, and switching. Despite this, Revenue Assurance is seen as a finance

function:

The balance of skills will depend on the scope of work delivered by Revenue Assurance.

Start-up Revenue Assurance functions often use consultant roles to identify areas for improvement,

plus basic technical skills.

More mature Revenue Assurance capabilities start

specializing in specific areas.

Reporting may be overlooked in the RA function‟s

early days, but is a powerful tool for gaining

influence.

60 70 80

Billing Solution Subject Matter Expert Network, Traffic, Switching Subject… Accounting Data Mining Subject Matter Expert Auditing Fraud Subject Matter Expert others

The Skills Paradox: A Finance Function with Mainly IT,

and Technical Competencies Revenue Assurance people core skill

90 %

0 10 20 30 40 50

Part of the Core Finance Risk and Compliance Function Audit-like Function Function within Billing Policing Funtion Function within IT or Network

0 10 20 30 40 50

Functional perception of the RA function

%


A substantial majority of respondents believe they are

doing quality work, have sufficient competence and

knowledge, and are given enough responsibilities and

challenges.

The idea that having a Revenue Assurance function adds value to the organization has yet to

be proven.

The industry is struggling to recruit people with the

full range of skills needed.

Automation and implementing the right tools are

key for RA teams to focus on value-added

activities, and to establish an end-to-end capability.

Influence remains a key concern, reflecting the

potential conflict between RA‟s need for across

departments authority and its position in the

hierarchy.

Budget Available Availability of Resources (People)

Effectiveness of Tools

However, they face four key challenges: Influence and Authority

Quality of Work Performed Competence and Knowledge Scope and Responsibilities

Medium High Excellent

Continue Demonstrating

it brings added

value

Automation Knowledge Senior Management Awareness

Power, Influence, and

Authority within the Organization

Budget Others

Value Contribution, Automation, and People are the

Top Organizational Priorities RA performance self-assessment

Low Poor

Revenue Assurance challenges 35

30

25

20

15

10

5

0

Source Global revenue assurance survey by Ernst & Young, 2009 53

Key Factors to be Considered • Collective responsibility for revenue assurance – the root cause for revenue leakage being the lack of coordination, it is important to have a separate team with clear responsibility

towards revenue assurance. • There should be a framework document for the revenue assurance activities. The

revenue assurance team should come out with a framework document with due consideration

for measurements and best practices • The revenue assurance team should also consider the external events related to the

reliability factors such as system failures, their impact and the effectiveness of the

contingency procedures. • Tracking and reporting as specified in the framework document should be strictly

implemented.

54

Ikwe Gideon

[email protected]

www.datahouseconsulting.com

Thank You

55
