Operators losing $8bn a year - report

Emerging market operators have $8 billion saving potential per year, says AlixPartners

Tags: AlixPartners (www.alixpartners.com/en/)United Arab Emirates
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Operators losing $8bn a year - report As the African telco sector opens up to more competition, operators will be forced to make additional infrastructure investments to gain better profits, says AlixPartners study.
By  Nithyasree Trivikram Published  November 24, 2010

Telecom companies in emerging markets including the Middle East and Africa, have the potential to achieve $8 billion in savings if they improve their business practices, according to a study by AlixPartners, a global business advisory firm.

The AlixPartners 2010 Global Telecommunications Outlook study includes an in depth analysis of the top 13 regional players. These companies cover over one billion subscribers between them, across 10 countries in Eastern Europe, the Middle East and Africa (EEMEA).  

Eric Benedict, managing director of AlixPartners, said that "figuring out a viable global structure in complex international markets" is a challenge for many operators. "This is compounded with the difficulties in finding and developing sufficient levels of management skills. Certain lessons, however, can be learned from telcos who have developed successful businesses across the globe and focused in on efficient structures in areas such as procurement, to show significant efficiencies across global operations," he added.

The report identified three key areas consisting of improvement in working capital management, advancing procurement practices to optimise operational and capital expenditures, and optimising synergies from mergers and acquisitions, as a means to help operators in EEMEA to improve their operations.

The study states that although the regional operators have enjoyed healthy profits compared to their European and North American counterparts, they will be forced to make further investments in infrastructure, as their profits will continue to face downward pressure as markets open up to competition and consumer data demands increase.

The report states that the leading players will be those who move quickly to adopt operational improvement initiatives learned from operators in mature markets. It also revealed that while operators are looking to consolidation and international acquisitions to support growth in profits, a decline in return on capital is seen by many of the EEMEA operators who have embarked on international M&A activities.

Nnenna Ilomechina, a director at AlixPartners, said: "The demand for expanded and diversified services such as data and video services, are set to increase significantly from roughly 5,000 terabytes in 2010 to 125,000 terabytes by the end of 2014 regionally." She added that this growth in demand will provide revenue growth opportunities for those operators that adopt the most efficient operations and most effective investments in infrastructure.


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