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Tue 23 Nov 2010 03:23 PM

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Better business models could save telcos $8bn - Dubai World advisor

AlixPartners highlights how telecoms could save $8bn by improving their operators

Better business models could save telcos $8bn - Dubai World advisor
TELECOM SAVINGS: While the operators have a combined value of $83bn, the study found that by streamlining their internal business operations they could save up to $8bn (Getty Images)
Better business models could save telcos $8bn - Dubai World advisor
Bahrain’s Telecommunications Regulatory Authority study revealed that average mobile tariffs in Arab countries are 80 to 100 percent higher than those in Europe, Australia, Canada or the US.
Better business models could save telcos $8bn - Dubai World advisor
(Getty Images)

Telecom operators in the Middle East could save up to $8bn if they improved their internal business practices, a US-based firm advising on the restructuring of Dubai World said in a new study unveiled on Tuesday.

With penetration rates reaching saturation point, dwindling margins and surging demand for capital investment, telecom operators will be forced to look internally to cut costs, according to AlixPartners’ 2010 Global Telecommunications Outlook study.

AlixPartners – who specialises in company restructuring and has worked with the likes of Dubai World, Japan Airlines and General Motors – analyzed the top 13 operators in Europe, the Middle East and Africa.

While the operators have a combined value of $83bn, the study found that by streamlining their internal business operations they could save up to $8bn.

One area operators can make savings is to increase their collection rates. The research found that for each day operators could reduce the credit period by would save them $250m as a group. If collection times could be returned to 2007 levels, the study estimated operators could save as much as $3bn in total.

Over the last five years, operators enjoyed an average growth rate of nearly 28 percent. However, the surging demand for data services will mean operators need to urgently increase their capital investment by around 13 percent, the study found.

“The demand for expanded and diversified services, such as data and video services, is set to increase significantly from roughly 5,000 terabytes in 2010 to 125,000 terabytes by the end of 2014 regionally.” said Nnenna Ilomechina, a director at AlixPartners in Dubai.

“This phenomenal growth in demand will provide revenue growth opportunities; however the winners will be the operators with the most efficient operations and most effective investments in infrastructure under their belts,” she added.

The need to make savings internally was highlighted by the fact that the cost to operators for each sale increased 6.3 percent in the Middle East region, while it was only two percent in the US and was actually decreasing by 0.3 percent in Europe.

Another option, said Eric Benedict, managing director of AlixPartners in Dubai, was to look at saving costs when operators are building new infrastructure, both in the new local markets and in new markets overseas.

Benedict described how one of its telecom clients had managed to save 25 percent building a new network by streamlining costs and improving its procurement processes.

 

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