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R4802 Overcoming the Opex Obstacle to
Telecom Profitability
Overcoming the Opex Obstacle to Telecom Profitability
in Telstra, Telecom New Zealand, SingTel Optus, China Telecom, China Mobile Hong Kong, China Unicom, MTNL, DoCoMo, TelecomAsia, SKT, KT, KDDI, AIS, Telekom Malaysia, Telkom Indonesia, Hutchison Australia, Hanaro, PLDT, Chunghwa, and PCCW. Improving operating profits is accomplished by either growing revenues or cutting costs. Since revenues are flat, at best, among service providers in North America and Europe, their focus has turned to reducing operating costs, after reducing capital spending (capex) drastically in 2001-2. Carriers in Asia-Pacific (AP), however, have kept profit margins high due to solid revenue growth, lower staffing expenses, a smaller capex “bubble”, more limited competition, government policies favoring a stable telecom sector, good economic growth, and some smart strategic decisions on the part of carriers. AP carriers reduced capex in 2002-3, but operating costs (excluding depreciation) have not yet been attacked aggressively. As revenue growth slows in the years ahead, carriers in AP must diligently reduce opex burdens in order to keep profit margins high, and continue to attract investors. Technology suppliers – hardware vendors, software firms, systems integrators – have a unique opportunity to help Asian carriers take on this task. While some of the operating cost “excess” is related to heavy customer acquisition costs, advertising/ marketing, and inefficient corporate structures, much more is related to operating and maintaining the network. The staff needed for these tasks often cost less, on average, than their peers in North America and Europe, but cutting opex may require smart staffing reductions. Carriers must choose or migrate to products that offer real opex efficiencies. Ideally, this will mean improvements in overall “life cycle costs”, including the initial capex costs. They also should find ways to turn up, monitor and repair service more efficiently (possibly through new control planes). Staff layoffs may be avoided or minimized for carriers that can re-task employees to growth markets or new service areas. Benefits Overcoming the Opex Obstacle delivers the following data and analysis to its readers: • Section 1: Executive Summary provides a concise review of
the analysis and conclusions of the report.
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