Failure to Control Costs No Longer a Risk for Telecoms Sector

by CFO Innovation Asia Staff, 06 August 2012

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Management Risk Management

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business model cost control M&A risk management telecommunications sector

Questions over new business models, levels of capital expenditure and regulatory uncertainty represent the biggest threats and opportunities in a rapidly transforming telecommunications sector, according to a new report by Ernst & Young.

"Top 10 Risks in Telecommunications 2012" report shows that, for the first time, failure to control costs is no longer in the top ten. While robust defensive positioning reinforced by strong cash flows has helped operators contend with economic uncertainties, new business models are required to unlock growth.

“Telecoms operators across the world face changing demands from customers, competitors and regulators, creating new pressures across their organizations," says David McGregor, Asia Pacific Telecommunications Leader at Ernst & Young. "Failure to shift their business models to cater to data services is mission-critical for all and is this year's leading sector risk."

McGregor notes that new approaches to pricing are crucial and operators have an important role to play as telecoms infrastructure becomes central to the development of other sectors, such as healthcare and utilities.

As operators widen their range of services, partnerships are no longer just a “nice to have” – strong industry ecosystems are required to support new propositions. At the same time, new business metrics are needed – to more effectively communicate financial and operational performance to the investor community.

Finally, organisational structures also have to adapt to a changing industry landscape so that new capabilities can be repurposed across the business. This represents the final new entry in this year's rankings.

Lagging behind on the customer experience

“Disengagement from the changing customer mindset” ranks number two this year, reflecting how operators need to keep pace with changing user expectations.

“While losing customer ownership is an ongoing industry concern, operators recognise that they also share ownership of their customers with a number of players, from device manufacturers to banks,” continues McGregor. “Understanding the fast-changing customer mindset is more vital than ever if industry players are to add value in a rapidly evolving marketplace. Operators remain uniquely well placed to achieve this.”

The report also highlights that operators have to make the most of their customer information assets to optimize network performance and drive the development of new services. Failure to do so would mean that demand cannot be turned into value.

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