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The telecoms industry in Europe and the US is at risk of becoming a low profit business. Margins are under pressure and could
drop from the current figure of 35 - 40% to as low as 15% within 5 years. Cost management has to become an inherent core
competence for wireless and wireline operators. Significant cost reductions are only possible with substantial changes in the
business/operating model. New pressures will mean a change in mindset and the ability to think outside the box. Arthur D.
Little has successfully managed this process with many operators.
Vodafone
Verizon
10
Deutsche Telekom
Telenor
NTT
AT&T
France Telecom
-5
Telefonica
KPN
Telecom Italia
-10
-15
-20
-25
-60
British Telecom
-50
-40
-30
-20
-10
10
20
30
40
50
60
EBITDA (% change)
EBITDA %
Revenue -3% CAGR
OPEX +2% CAGR
Y0
Y1
Y2
Y3
Y4
Y5
nn
Quick wins
Optimizing
rental OPEX
Benefit
low
Company
license mgmt.
Operational saving
measures
Residential
Digitalization
last mile inventory
SME
Key
Accounts
Dropped measures
Effort/Risk
high
Plan
Build
Run
Wireline
4G network
cooperation
low
Requirements
Strategic saving
measures
Billing/CRM IT
consolidation
Server
virtualization
External1)
Need to develop
specific cost
management
skills
Project
Site
SubCodesign & identifi- mission ordination
Strategic
planning cation,
of conplanning
acquisition
struction
(network
Opera& per& inarchitectional
missions
stallation
ture
planning
& design,
(annual
rollout
rollout
Wireless
principles,
portfolio
network
Site
SubComgmt) Project
5 year
design & identifi- mission ordination
roadplanning cation,
of conmap)
acquisition
struction
& per& inmissions
stallation
Procurement
Supplier management
Controlling
Management
Closing
CorrecTive &
preventive
maintenance
Operations
Closing
CorrecTive &
preventive
maintenance
Cross-unit alignment
Conclusion
Side box:
Case study Barriers to overcome when
consolidating wireline & wireless organizations
Contacts
Karim Taga
Managing Partner TIME practice
taga.karim@adlittle.com
Jesus Portal
Partner TIME practice
portal.jesus@adlittle.com
Technology barrier
By nature there is a significant difference based on the
technology itself and related physics. The challenge for a
successful integration lies in finding and consolidating the
relevant competences that are overlapping (e. g. rollout
supervising, supplier management) and maintaining the
individual activities specific to the technology (e. g. radio site
approval, splicing).
Thomas Kuruvilla
Cultural barrier
Clemens Boehmer
Additional author
Arthur D. Little
Political barrier
The excess of management shouldnt be underestimated.
As wireless and wireline responsibilities are merged, there
are suddenly two management resources available to take
responsibility. Often one can observe that interim organizational
units will be formed to accommodate and maintain both
management resources. This postpones the effective fixedmobile consolidation further and reduces the risk of a big bang
approach when consolidating the organization.
www.adl.com/Cost_Reduction