Revenue assurance 101
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The document provides an overview of revenue assurance in the telecommunications sector, detailing its necessity due to market pressures, billing complexities, and potential revenue leakages. It outlines the key processes involved, the risks associated with each stage of the revenue cycle, and offers strategies for identifying and mitigating these risks. The core activities of revenue assurance include subscription, usage, rating, and billing assurance, all of which aim to ensure the accuracy and completeness of billed revenues.
Revenue assurance 101
- 1. Telecom Revenue assurance 101 Ikwe Gideon gideon.ikwe@datahouseconsulting.com www.datahouseconsulting.com 1© Datahouse Consulting
- 2. Agenda 1 2 3 4 What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools Who will assure revenue?5 Key factor to consider6 2© Datahouse Consulting
- 3. Why is Revenue Assurance Required? • Effects of worsening market conditions • Effects of investor pressure: • Downgrading of debts • Difficulty in raising capital for new projects • Impact of billing errors on customers and trading partners • The Nature of service render( Service is generated immediately customer place an order for call, implies quality control must be embedded into all element of the process ) • The use of multi-systems from various vendor • Importance of usage data integrity • Complexity of the Billing process • Increasing Government regulation • Stiff Competitive Environment 3© Datahouse Consulting
- 4. What is Revenue Assurance? • The process of measuring achieved revenue against forecasts, and accounting for any discrepancies • The Art of finding what you didn’t know was missing • The verification of the amount being billed • Protecting and optimising revenues and profits • Everything involved in ensuring that the maximum amount of revenue comes into the organisation, and that all leakage in the system is rectified • Any activity an organization does to ensure that processes, practices and procedures result in revenue that is billed completely, accurately and in a timely manner • Revenue Assurance as a discipline within a telecommunications operator is necessary because of one apparently basic Laws of the universe. • Which is a corollary to Murphy’s Law, states that: If something can go wrong, it will, and at the most inconvenient moment. This is why tomato soup always splashes onto one’s only clean shirt just before an important meeting, or the car breaks down on a lonely road when the cell phone’s battery has just gone flat. • Revenue Assurance cannot revoke these Natural Laws, but it can and does mitigate their malign effects. 4© Datahouse Consulting
- 5. Product Partner management Customer management Order Management & Provisioning Network Management & usage Finance & Accounting Receivables management Rating & Billing & Offer Management Revenue Assurance • Correct Rates • Profitable product offerings • Appropriate revenue assurance Controls in place for new offer • • • • Credit assessment Timely activation Provisioning Link to tariff plan, Services and discounts • xDR leakage • Inaccurate xDRs • High usage • Reference data management • Unbillable xDRs • Billing cycle calculation& generation of bill existence of postings • Revenue recognition • • • • Payment follow-up Dunning Bad debt management Dispute resolution • • • • Carecred its Churn management • Completeness & • • • • Dealer commissions Interconnection setup Routing Contentprovider Contract compliance Variation Orders In an ideal world, Revenue Assurance encompasses every step in the revenue process, all the way from the transaction to the accounting ledger. It integrates the Revenue Assurance process within the overall enterprise risk management of the company. It covers all revenue-related risks ranging from revenue leakage through to revenue recognition in the financial statements. And it manages people, processes, and technology in an integrated way to ensure maximum revenues and minimum costs. Revenue Assurance Processes: an holistic approach 5© Datahouse Consulting
- 6. Enablers Placement and empowerment in organization Prioritized focus, scope and frequency Periodic reviews and continuous monitoring Quantification Plugging of revenue losses and process/control/system lapses Timely reporting and escalation Preventive Detective Top-line Bottom-line Skill set Tools and analytics Operationalization GOVERNANCE REVENUE RISK ASSESSMENT EVENT INDENTIFICATION IMPACT ANALYSIS RECOVERYAND SUSTENANCE COMMUNICATION AND REPORTING Methodology Revenue Assurance Framework Revenue Exposure Revenue Leakage Revenue Enhancement Cost Saving Technology Process People 6© Datahouse Consulting
- 8. RA COVERAGE
- 9. EXTENDED REVENUE ASSURANCE Risk management Cost management Regulation Revenue management reporting Controls environment Strategy formulation Core Revenue Assurance Objective Minimize revenue leakage Scope of Revenue Assurance – what‟s in & what‟s out? Operational support 9© Datahouse Consulting
- 10. Revenue Assurance Core Activities • Subscription Assurance • Usage Assurance • Rating Assurance • Mediation Assurance • Billing-Postpaid Assurance • Prepaid Assurance • Interconnect Assurance • Roaming Assurance • Business insight and Intelligence • Thirty party service Cost Assurance 10© Datahouse Consulting
- 11. Revenue Assurance Basics The core principle for processing of data for metering and billing follow four logical steps: Capture – recording the supply that is made Conveyance – the transmission of data from the point of recording the supply to the point of presentation to the customer Calculation – the calculation of the charge due for the supply made Collection – the collection of the charge due from the consumers of the service Revenue Assurance focuses on each of these areas in order to detect the leakage, correct or fix the issue and then ensure that changes are made to prevent that same issue from occurring in future. As RA develops other areas of leakage are identified throughout the metering and billing process. Using a mix of data Analysis and process improvement techniques RA is able to move through the levels of maturity by striving for continual improvement. Data Analysis is focused upon a known leakage and offers quantitative results that the team can monitor over time. At this point the process improvement team are used to identify the root cause. Process Improvement considers the end to end process. Through this end to end understanding of the hand offs between processes potential revenue leakages are identified through risk analysis techniques. These areas are then handed over to the data analysis team to gather quantifiable results Capture Conveyance Collecti on Monitoring and Reporting Detect Correct Ensure Calculation 11© Datahouse Consulting
- 12. Agenda 1 2 3 4 What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools Who will assure revenue?5 Key factor to consider6 12© Datahouse Consulting
- 13. How to Assure Revenue • Identify key attributes of every service that is on operation that can affect revenue. • Identify the affected data sources associated with the key attributes (such as switches, mediation components, roaming clearinghouses and interconnect operators). • Map the data sources to the information model. • Identify the data flows across the data sources, identify the location of the data sources and to where the data is being send from each of these data sources. • Define controls to ensure the integrity of data related to revenue, across all data flows. • Define thresholds for loss at each point. This should be derived from the target threshold on an end to end reconciliation, thresholds such as rejection tolerance and time to receive CDRs. • Devise a mechanism to cross check with the first point to the last point in the data flow (switch to billing system). 13© Datahouse Consulting
- 14. Questions RA Ask… • How much usage is recorded by your network? • Is all usage being billed? • Are all customers on the correct tariff? • Are all tariffs been implemented correctly? • Any unauthorized usage taking place? • Do you know who is using your network? • Are traffic and charges with partners correct? • Is traffic being routed most cost effectively? • Are you getting best prices from your third party services? • Are your products profitable? • Identify products and services • Establish how services can be used • Understand network implementation • How and where usage data is generated • Which end systems require what information • Determine usage data flows • Determine accuracy of end-to- end billing chain • Independent analysis of raw usage data • Data reconciliation with billing statistics • Identify discrepancies • Derive revenue impact • Build business case Fundamental RA Strategies • Network usage with billing accounts database • Network usage with retail billing statistics • Network usage data with interconnect settlement • Network roaming network usage with TAP-out/in • TAP-in with billing statistics • Orders database with HLR and billing • Switch statistics with network usage data • Signalling information with network usage data • Trend analysis Basic Reconciliation Approach 14© Datahouse Consulting
- 15. Agenda 1 2 3 4 What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools Who will assure revenue?5 Key factor to consider6 15© Datahouse Consulting
- 16. Sources of Revenue Leakage? 16© Datahouse Consulting
- 17. Product and offer management, Sales Order management and provisioning Risk • Lack of revenue assurance checks/testing prior to new product/service launch • Non adherence to change management process • Product and services not designed to address all known and potential fraud risks and revenue leakage risks • Lack of post launch assessments and reviews to assess the impact of new products and services • Tariffs communicated to the customers through brochures, marketing campaigns or through websites different from the billing system • promotion schemes design/implementation issues may lead to dealer commission fraud, subscription fraud and high acquisition cost • Zero minutes of usage subscribers in the network indicating dubious connections • First bill defaulters indicating subscription frauds • False promises by the sales team leading to customer dissatisfaction resulting in disputes • Allocation of subsidized plans to subscriber’s not entitled to same • Inactive recharge vouchers (RCV) floating in the market • High quantity of active stock lying at warehouse of recharge vouchers • Lack of related number process at the time of sales (subscribers with bad-debt / fraud history re-entering the system • Subscribers provisioned in the billing system improperly provisioned in the network elements • Calls, SMS and other services (other than content billing) allowed to subscribers after termination date of the subscriber in the billing system • Customer provisioned on Postpaid billing but not on HLR and vice versa • Customer provisioned (configured) on HLR but not on IN and vice versa • IN (Camel) parameters not assigned for each MSISDN number on the switch • Subscribers with inadequate balance in the IN allowed to make a call or send SMS • Customer profile in HLR does not match with profile configured on IN and Postpaid system (e.g. customer has opted for GPRS, same does not reflect on HLR) • Subscribers given access to premium services against the business rules e.g. international roaming, international access • Incorrect bill plan allocation 17© Datahouse Consulting
- 18. Network management and usage Risk • CDRs may not be generated for all billable calls, SMS and other services • Parameter on the switch for maximum duration for calls and other services allowed in the IN Platform / GGSN and the Switch may not be in line with policies of the company • Switch may not be sending/skipping the signal to the IN (SCP/STP) which is required to ascertain whether the subscriber has adequate balance • IN may be incorrectly computing the maximum available call time • Switch not disconnecting the call after the call time is equal to the maximum allowed time intimated by the IN Platform for each call • Signaling of call related information by the IN to the Switch and vice versa when the call is commenced and ended may be incorrect or not proper • Incomplete capture of call details • Incorrect configuration of destination and short codes • Incorrect B-Table configuration • Not all Billable CDRs are generated by the switch • Not all CDRs are transmitted from switch to mediation • Delay or no transmission of TT files between switch to mediation • No transmission of TT files between switch to mediation • No site level redundancy for critical network elements • High Network downtime of network elements like MSC, SCP, STP, BSC etc. • High network downtime of billing systems like SDP • Baseline configurations for the switch and other critical network elements are not formally defined • Inadequate controls over users for switch management (e.g. user accounts of former employees still active) • Inadequate storage capacity of switch and mediation devices which may lead to loss of CDRs • • Sub optimal call routing • OSS traffic may not be encrypted, hence confidentiality and integrity may be compromised • IMSI information may not be encrypted • Network administrators may not monitor the OSS network logs for any unauthorized activity. • Clocks not synchronized across switches and other network elements (IN/SGSN/SMSC) • Duration mismatches in switch and IN/ Billing system time • Millisecond calls not rounded up • B-Party answered calls with zero duration may not be charged 18© Datahouse Consulting
- 19. Rating and billing Risk • CDRs for all calls, SMS and other services before the cut-off date may not be received in Mediation device from the switch. • Billable postpaid mobile CDRs may be skipped during processing through the mediation filter • Billable CDRs may be skipped during processing through the Data capture filter in the billing system. • Duplicate CDRs may be billed to subscribers • Price plans being maintained in the billing system may be incorrect • All destinations may not be maintained in the billing system • Price plans in the Billing system may not authorized/approved • All billable calls may not be rated • Subscribers may not be assigned to the correct price plan • Rating algorithm may incorrectly compute charges for each call, SMS and other services • Roaming subscriber not being charged for the roaming calls • • Revenue for content services maybe incorrectly computed and deducted from the subscribers balance • Customers may be invoiced beyond the legally billable limit • Services, subscriptions, other charges and adjustments including discounts for the invoice period may be incorrectly extracted for invoicing (including content billing) • All billable subscribers may not be invoiced • All invoices may not be received by the final customer • Revenue, accounts receivable and accrued income in the accounting system may not reflect in the billing reports • Revenue for the period may not be accrued based on actual usage during the reporting period • All unprocessed CDRs are not corrected and reprocessed in a timely manner • Calls not being charged as per the tariff plan – local on net, local off net, international calls, etc. • Customer not being invoiced for the chargeable calls • Adjustments to customers may not be authorized • Bonus adjustments and credits incorrectly calculated • Prepaid trigger to restrict at defined thresholds working inappropriately • Balance updated on recharge more/less than the voucher value • Balance transferred by subscriber is not equal to balance received by destination • Peer to peer transaction allowed when source and destination are same which may result in increase of balance of source MSISDN • Round up error of duration recorded at switch and IN (e.g. actual duration of call recorded at switch may be 5 seconds, but that recorded at IN may be 4 seconds) • Peak time calls being charged at non-peak time rates • Call charge exceeds the subscriber balance and the same does not reflect as a negative balance • On net calls being charged off net rates and vice versa • Incorrect setting for concessional /discounted billing schemes • No real time rating of SMS CDRs causing negative balances • No reconciliation between MoU as per the switch and billing system • Whether you have adequate control over exchanged test SIMs, TAP-In and TAP-Out files
- 20. Collection , adjustments, Finance and accounting Risk • Subscribers whose services have been barred due to crossed credit limit are allowed by customer care to continue services without paying bills • More CUG/FnF numbers are added for subscribers from the back end by customer care • No timely action on the inconsistencies in the number of subscribers per the billing system and switch • Inaccurate reconciliation of MoU between the switch and the billing system • High usage customers not being monitored • High usage roaming customers not being monitored • Uncommon trend in calling pattern of a subscriber not generating an alarm • Calls to barred/disputed countries not being monitored • Infrequent monitoring of credit limits assigned to subscribers • Credit limit to a subscriber is higher/lower than the policy defined • • Documentary proof for calculation of credit limits not in order • Customer not barred on reaching stipulated credit limit • Non monitoring of customers failing to make the bill payment • No follow ups for defaulted customers (e.g. no reminder Sms, no outbound calling, etc...) • Adjustment/waiver passed more than the stipulated limit • Adjustment/waiver type passed not as per the policy • High outstanding of interconnect operators (e.g. an invoice has not been paid by an interconnect partner for more than 180 days) • Recharge by a customer not reflected in his balance • Adjustment/waiver type passed not as per the policy • High outstanding of interconnect operators (e.g. an invoice has not been paid by an interconnect partner for more than 180 days) • Recharge by a customer not reflected in his balance • Usage incorrectly captured in the revenue report • Component balances for prepaid accounts erroneously calculated • Deferred revenue balance incorrectly calculated • Roaming revenue inaccurately calculated • Interconnect expense and revenue not captured correctly • No allowance or wrong provision for bad debts
- 21. Examples of Potential Causes of Leakage Likely Network Problems • Missing A numbers • Missing records & Clock drift • Failure to track customer activities properly • Inaccurate recording of call duration • Itemised billing not activated • Routing prefixes • Unexpected records • Switch restarts • Communication failures • Non optimal routing Likely Billing Problems • Maximum call duration • Poor Suspense Management & Late Billing • Billing the wrong element(volume rather than duration) • Multiple billing for the same call • Long duration calls discarded • Network terminated calls discarded • Incorrect tariff applied • Tariff not implemented correctly • Customers not linked to billing accounts Likely Mediation Problems • Failure to filter records correctly • Failure to balance batches • Failure to clear suspense • Incorrect application of customer identifiers • Incorrect formating of CDr’s • Dropped records • Duplicate Records • Removal of billable records Mis-identification of call type Out of date reference tables Likely Collection/Dunning Problems • Failure to track old account • Misapplication of credit • Inefficient dunning practices & policies • Failure to feed back dunning lessons to marketing, sales and product planning • Credit policy management • Errors on transfer from billing to A/R.GL Likely Sales and Marketing Problem • Over promising, too many special request • Pricing below target Margin, excessive discount • Poor product specification-cannot bill products/Poor contracts • Sales to cash process breakdown • Abuse of shortcut or fast track processes • Contract terms not passed correctly to billing • Incorrect notification of billing start Likely Product development Problems • Failure to plan for rate-plan update to billing • Failure to build transaction collection mechanism into the start phase of product rollout • Failure to include the cost of billing into the estimate of cost of product introduction 21
- 22. Ranking of Sources of Revenue Leakage 7 Revenue leakage occurs mainly around the core Revenue Assurance processes. The survey conducted by the leading consulting firm where respondents‟ (64 operators world wide) key concerns in this context remain the absence of adequate controls and procedures and the loss of data in the revenue cycle. Data loss between systems and the implementation of new products and services are also important sources of leakage. Medium Lack of process control and procedures Data loss between systems New products/services Rating errors Tariff changes System failure Fraud (all types) Routing and reference data errors Issue with XDR integrity Low Source: Global revenue assurance survey by Ernst & Young, 2009 22© Datahouse Consulting
- 23. Percentage Loss of Revenue Leakage Telecom operators are confronted with massive data sets and data flows that support their billing processes. As these billing processes are typically highly automated processes supported by multiple and complex systems, loss of data integrity during transfers and 100% 95% Opportunity losses Billable Events Billed Revenue 90% Collectible Services not billed or mis- billed Correct Charge Adjustment 4% 4% 1% 1% Allowance Adjustments (Disputes) 3% Write-offs (Bad debt) 1% Fraud Uncollectible Expenses Cash Flow processing can occur and lead to unreliable data flows. Potential Revenue Opportunity 104% All Attempted Events Numbers are illustrative Revenue Typically gap: 2%-15% Source: Global revenue assurance survey by Ernst & Young, 2009 23© Datahouse Consulting
- 24. Revenue leakage (including fraud-related) across the revenue chain remains a challenge for operators. While operators in developing markets face a wide range of issues including the upfront challenge of high revenue leakages, operators in developed markets are faced with insufficient data to accurately identify and recover most of the estimated leakages. The survey conducted by the leading consulting firm where respondents‟ were asked about estimated revenue leakage in their operations, 54 percent of RA Heads indicated that revenue leakage was greater than 1 percent of total revenue (excluding fraud), and 15 percent indicated revenue leakage of greater than 3 percent. Some respondents in Africa acknowledged revenue leakage greater than 10 percent. 30% 17% 17% 18% 0% 10% 20% 30% 40% 50% 60% 70% Europ and America ASPAC Africa and Middle East % of fraud leakage % of revenue leakage 58% 61% Leakage – Estimated, Identified and Recovered % of respondents with revenue and fraud leakage greater than 1% 18% 29% 23% 41% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Africa and Middle East ASPAC % of respondents with no information on leakage estimation % of fraud leakages % of revenue leakages 37% Europ and America 5% Source: Global revenue assurance survey by KPMG, 2009 24
- 25. regions. Forty percent of respondents estimated that less than half of the total leakage is identified by the RA function. Sixty percent of respondents estimated that less than half of identified leakage is recovered from subscriber or partner billing. More than one-quarter of respondents did not have information to estimate the percentage of actual leakages identified. Leakage identification seemed a bigger challenge in developing markets where large numbers of respondents from Africa, the Middle East, and the Asia-Pacific region indicated identification of less than 10 percent of estimated leakages. But while identification of leakages is a hurdle for a handful of operators, recovery of leakages is a challenge across all 10% 10% 30% 44% 50% 81% 50% 40% 30% 20% 10% 0% 70% 60% 100% 90% 80% 28% 0% 28% Africa and Middle East ASPAC 19% 0% Europe and America % Greater than 50% 25-50% 10-25% Less than 10% Leakage – Estimated, Identified and Recovered (cont‟d) Regional breakdown of revenue leakage identified 55% 23% 0% 23% 35% 12% 24% 29% 63% 5% 5% 26% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Africa and Middle East ASPAC Europe and America Regional breakdown of revenue leakage identified % Greater than 50% 25-50% 10-25% Less than 1 Source: Global revenue assurance survey by KPMG, 2009 25
- 26. Revenue Leakage - Conclusion • For the majority of operators, recovery of leakages ranged from 2.5 percent up to 37.5 percent of the total estimated revenue leakage. This indicates that a large portion of revenue leakage remains un-recovered. Although revenue leakage worldwide was generally 1-3 percent of revenues, the quantum of this loss even at this miniscule percentage is significant. • It is imperative for operators to assess the complete life cycle of capturing leakage data, identifying the leakages and recovering them. Timeliness is also critical since leakages recovered over an extended period of time are less likely to realize the potential value. As the time between the leakage and recovery increases, the probability and size of the recovery may decline. 1% revenue leakage over one billion of revenue is still 10 million. 26© Datahouse Consulting
- 27. Agenda 1 2 3 4 What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools Who will assure revenue?5 Key factor to consider6 27
- 28. Average Balanced Mix of KPIs Utilized It is good practice to have a well- balanced set of KPIs covering four aspects: • revenue leakage • • • data quality Revenue Assurance management control efficiency and effectiveness. Most operators cite Revenue Assurance KPIs around revenue leakage. Data quality KPIs are also used by many operators (27% of KPIs monitored). But KPIs around Revenue Assurance management (6% of KPIs monitored) and process and control efficiency and effectiveness (10% of KPIs monitored) are not widely used. Data Quality Measuring the validity, accuracy and coherency within the operational systems and databases, eg., misaligned customer records/total customer records Revenue Leakage Measuring the implication of revenue leakage on the bottom line, eg., recovered and billed records/total billed records RA Management Measuring the efficiency and effectiveness (result oriented) of RA organization and RA practices, eg., solved RA incidents/total RA incidents Process and Control Efficiency and Effectiveness Measuring the efficiency and effectiveness (result oriented) of individual controls, eg., value of cases from control X/total RA cases value RA KPIs 27% 57% 10% 6% Source: Global revenue assurance survey by Ernst & Young, 2009 28
- 29. Measurement via KPIs is common practice: • Almost all participants use KPIs. With a focus on all kind of data records („xDRs‟) leakage, rating, and billing errors: • • The number one KPI is total revenue leakage. Rating and billing errors are closely • followed up. Quantity of xDRs recovered or recycled is also used. • However, only 13% of respondents mention average revenue per user („ARPU‟) as a KPI in the Revenue Assurance context. Balanced scorecard and benchmarking are not widely used: • • Only 21% use a balanced scorecard. Benchmarking is not widespread, due to a lack of relevant benchmarks. Revenue Assurance‟s Performance is Measured Mainly via Revenue Leakage KPIs 10 0 50 40 30 20 Revenue Loss Reported Value XDRs Written Off Billing Errors Rating Errors XDRs in Suspense and Errors KPIs monitored by the RA function 30 20 10 0 KPIs Audits (Internal) Audits (External) Bench-marking Balanced Scorecard Others Not Formally Measuring Indications in place measuring Revenue Assurance effectiveness %100 90 80 70 60 % 90 80 70 60 50 40 Source: Global revenue assurance survey by Ernst & Young, 2009 29
- 30. % of revenue Operators‟ targets vary by geographical area, but are commonly about 1%: The leakage acceptance spectrum is wide – operators in Central and Latin America tolerate leakage of only 0.51%, while those in the Middle East accept an average of 1.75% – based on our respondents. Acceptance of revenue leakage also varies by maturity level: Less mature operators target leakage of 1.5% on average, while mature operators accept less than 0.5%. …but 1% of a lot of revenue is still a lot of money: 1% of US$1 billion is still US$10 million; so operators still have room for further efforts to reduce leakage. 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 Middle East North America Asia Average South-East Europe Western Europe Africa Americas 1.8 2 % of revenue The Average Leakage Reduction Target is 1% Level of accepted revenue leakage Average accepted revenue leakage by maturity level 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 M1 M2 M3 M4 M5 Source: Global revenue assurance survey by Ernst & Young, 2009 30
- 31. Revenue Assurance Technologies/Systems/Tools Leading practice tools RA Software Test Call Generator (TCG) Fraud Management System (FMS) Probes Data warehouse (DWH) Typical controls performed with the tool Trend analysis Switch to bill reconciliation Provisioning reconciliations Independent Revenue Reporting Test calling with CDR generation and rating validation Near real time usage monitoring Traffic pattern analysis Generating independent traffic records which could be reconciled with CDRs Reconciliations Trend analysis 31
- 32. During the survey conducted by the leading consulting firm, the responses made from the all the respondents in the context of revenue assurance automation within their own company were analyzed and connected with the firms‟ best practice which is showing clear distinction between the manual and automated controls of the major revenue assurance domain. Revenue Assurance Automation 40 30 20 10 0 50 70 60 80 % Manual + data warehouse % Auto (in-house or commercial software) % Product and Offer Management Order and Network Management Management and Usage Rating and Billing Receivables management Finance and Customer Accounting Management Partner Management Provisioning Source: Global revenue assurance survey by Ernst & Young, 2009 32© Datahouse Consulting
- 33. 33 OPEX RATIO OPEX and CAPEX Analysis • Opex per total subscriber connection • Opex per Minute • Opex per site • Opex % of revenue • Service Opex (Customer Care & Billing, Service Creation & Administration) as % Revenue • Network Operating Cost as % Revenue • Marketing Opex/Gross Connection • Marketing Opex/Net Connection • Rental as % Network Opex • Power & Fuel as % Network Opex • Repair & Maintenance as %Network Opex • Transmission as % Network Opex • Core Network as % Network Opex
- 34. OPEX and CAPEX Analysis 34 CAPEX RATIO • Capex (% Revenue) • Capex per total connection • Capex per Minute • Capex per Site • Capex-MSC/ Subs • Capex-BTS/ Subs • Gross Capex ( Gross Fixed Assets + Incremental Capex) • Spectrum Charges as % Revenue • License Fee as % Revenue • Capex (Intelligent network)/Prepaid Revenue • Capex (Core Network-Voice, SMS excluding Data)/Total Revenue • Capex (core Network-Data)/Data Revenue • IT infrastrucrure /Total Revenue • Transmission Backbone/Total Revenue • Product related CAPEX/Revenue from Product
- 35. 35 Marketing and Sales Operating Efficiency Growth Performance, Quality and Coverage Financial and Revenue Usage and Subscriber Financials • Gearing ( net Debt/ EBIDTA) • EBIDTA % Revenue ,PAT % Revenue • ROIC (EBIDTA/ Gross Capex) • FCF (EBIDTA – Capex –Tax) % Revenue • Capital Productivity (Revenue / Gross Capex) • P/E Revenue • ARPU ( Average Revenue Per User) • ARPU Segmentation: Voice , Data , Aggregate • ARPU Segmentation: Prepaid, Post-paid , Blended • ARPM (Average Revenue Per Minute) • ARPM Segmentation: Prepaid , Post-paid , Blended • Average Revenue Per Call • Average Revenue Per Cell Site • Average Revenue Per Employee • Revenue Breakup (%) • Access: Connection, Subscription • Wireless Voice • Data ,Internet,Interconnect • Roaming , International Roaming Revenue 70+ Key Telecom Financial and Management KPI’s
- 36. 36 Marketing and Sales Operating Efficiency Growth Performance, Quality and Coverage Financial and Revenue Usage and Subscriber • Subscriber Acquisition Cost (SAC ) : Dealer Commission, Terminal Subsidy, Sales, Marketing, Distribution cost • SAC as % Revenue • SAC / net Addition • SAC / Minute • Sales Outlet • Company Owned Sales Outlet • Number of Retail Outlets or Point of Presence (POP) • Customer segmentation • Analysis of subscriptions • Top N customers • Churn (No. of Subscriber who stopped using Services or left particular network) • Total Subs • Subs Segmentation: Prepaid, Post Paid • Churn per month per segments • Subscriber per Employee (13,000) • Subs Share • Revenue Market Share • Minutes Market Share 70+ Key Telecom Financial and Management KPI’s
- 37. 37 Marketing and Sales Operating Efficiency Growth Performance, Quality and Coverage Financial and Revenue Usage and Subscriber • Number of BTS Sites • Number of MSC Sites • Number of Employees • MSC/ Subs • MSC/ BTS • BTS/ Subs (1000) • BTS/ Km2 • Spectrum Charges as % Revenue • License Fee as % Revenue • Interconnect Cost as % Revenue • Labour Cost (% Revenue) • OSS/ BSS Ratio • Share of Net Adds Subs • Share of Incremental Revenue • Quarterly Sites Added • MRPU ( Marginal Revenue Per User) • Growth • Subs Growth • Revenue Growth • Services Revenue Growth • Services Revenue Acceleration • ARPU Growth • ARPM Growth • Subs Added / Retail Point of Presence (POP) 70+ Key Telecom Financial and Management KPI’s
- 38. 38 Marketing and Sales Operating Efficiency Growth Performance, Quality and Coverage Financial and Revenue Subscriber Usage Usage • Minutes of Usage (MOU) • MOU Segmentation: Prepaid , Post-paid , Aggregate • MOU Segmentation: Incoming, Outgoing , Aggregate • Number of Outgoing SMS Per Sub Per Month • Minutes Carried Per Month (MON) • Number of recharges per subscriber • Average Data usage per subscriber per month( MB) • % Airtime Capacity Utilization • Minutes Per Site • Number of Calls • Number of Calls per Subscriber • Average Call Duration • Roaming Minutes • International Roaming Minutes • International Roaming Minutes Segmentation: Incoming , Outgoing • Top 50% Users Revenue % • Top 50% Sites Revenue % 70+ Key Telecom Financial and Management KPI’s
- 39. 39 Marketing and Sales Operating Efficiency Quality and Coverage Financial and Revenue Subscriber Usage Coverage and Spread • Towns ,Area and Population Covered • % Traffic Within Own Mobile • Service Performance • RTT Delay (Ms) (800) • Application Through Put ( kbps) (25 Kbps) • Call Setup Time • Network Congestion Point of Interconnection (POI) Congestion (<0.5%) • Connection Establishment (Accessibility) • Call Setup Success Rate (CSSR) (>95%) • Standalone Dedicated Control Channel (SDCCH) Congestion (<1%) • TDH Congestion (<2%) • Connection Maintenance (Retain ability) • Call Drop Rate (CDR) (< 2%) • Worst Affected Cells for Call Drop Rate (<5%) • Connection with Good voice quality (>95%) • Service Quality • Prepaid – Prepaid Service Success Rate • Number Portability – Drop Rate • Handover Success Rate • Network Availability • BTSs Accumulated downtime (<2%) • Worst Affected BTSs due to downtime (<2%) • % of open and Closed and level of escalation priority required • Mean time to resolved • Work in progress & Customer service level statistics 70+ Key Telecom Financial and Management KPI’s
- 40. 40 Marketing and Sales Operating Efficiency Country Telecom Sector Financial and Revenue Subscriber Usage • Penetration • Penetration ( >5Years Population) • Penetration per House Hold • Top 2 Players Share • Top 2 Players Share Change • HHI Index • Pricing Long Distance/ Local Price Ratio • Average F2M Interconnect Rate • Average M2M Interconnect Rate • Sim/ User ( Number of Subscribers/ Number of handset Sales) • ARPU ARPU % of disposable income • Mobile Revenue/ GDP • Regional Roaming Usage (Roaming Travelers / Intra Regional Travelers) • Subs/Km2/MHz • Subs/Km2 (Urban) • Spectrum per Operator (MHz) 70+ Key Telecom Financial and Management KPI’s
- 41. Agenda 1 2 3 4 What is revenue assurance? How to assure revenue? Sources , Type and Statistics of Revenue Leakages Revenue Assurance KPI and Tools Who will assure revenue?5 Key factor to consider6 41
- 42. Revenue Assurance Organization Objective To provide and sustain an effective enterprise-wide process that will independently confirm the end-to-end completeness, accuracy, integrity and timely capture, billing and reporting of all revenue generating events; while identifying emerging revenue risks and/or opportunities with a view to mitigating/exploiting same. 42
- 43. Where should the Revenue Assurance function sit within the organization? How many people should there be within the Revenue Assurance organization? What should RA‟s relationship be with functions such as fraud, internal audit, risk management, finance, billing, and customer relationship management? What should the organizational structure look like? What type of roles and skills should there be in the team? How can we build cultural awareness by linking RA‟s performance to wider Group targets? Unfortunately there is no one-size-fits-all answer to these questions: The objectives set for the Revenue Assurance function, together with the characteristics of the organization as a whole, will shape the appropriate structure. The nature of the RA organization will be influenced by factors including: • size of the organization • existing structure of the organization • risk culture • group structure • initial start-up point (where was it initiated?) • executive sponsorship • regulatory requirements. The Revenue Assurance Organization: Insight How to structure a Revenue Assurance organization to achieve success? Many operators continue to struggle with questions such as these: 43© Datahouse Consulting
- 44. Governance Revenue analytics & control execution Project team(s) • Risk assessment • Strategy development • Developing policies and procedures • Compliance monitoring • Management • Follow up on trends • Revenue forecasting • Root cause analysis differences between forecast and actual • Day-to-day control execution • Special project team(s) to run larger RA or Fraud projects such as implementation of RAS and FMS Diagnostic reporting Core RA team Ad hoc team • Building new controls • Investigating RA issues and perform root cause analysis • Assist in risk assessment Fraud management • Managing the telecommunication fraud aspects Who will Assure Revenue? Revenue Assurance Department RA Director 44© Datahouse Consulting
- 45. Revenue Assurance Function Maturity Levels Strategy Process and tools Maturity Level 1 Early •No formalized strategy and limited RA influence Maturity Level 2 Recurring •No formalized strategy, but some RA successes Maturity Level 3 Established •Formalized strategy and influence at executive level Maturity Level 4 Administered •Formalized strategy with strategic papers and elements of group integration Maturity Level 5 Optimized •Strategy is risk- based, includes cost reduction parameters, and is integrated within the group •Undefined RA structure. Limited to isolated and personal initiatives Organization •Small team not focusing exclusively on RA activities •Early formalization of the RA function, but with low influence •Skillset in development •Defined and recognizable team focusing on RA activities •Availability of multidisciplinary skills. Training on an ad hoc basis •RA activities are spread into the organization and monitored by the RA team •RA staff have key technical skills and subject matter expertise. Training budgets are available •RA primarily undertakes a monitoring and advisory role •RA staff also have accounting and auditing skills. Formal training and skills optimization plans are in place •Reactive and instinct-based RA activities. Only basic RA tasks •Substantial manual effort and end-user computing tools only •Basic revenue leakage-related tasks performed •Automation remains fragmented •Major RA process covered •Some automated RA processes •All revenue leakage and fraud processes are covered •Tools are widely available •All RA processes are covered •Optimized automation of RA tasks 45
- 46. During the survey conducted by the leading consulting firm, the responses made from the all the respondents in the context of revenue assurance function maturity level automation within their own company were analyzed in the combination of the operators‟ own self-assessments from the survey questionnaire, with a comparative analysis ranking respondents versus the maturity model. And it evident from the chart that 73% of the revenue assurance functions with in the respondents from around the world were rated between the maturity level 2 and 4. 2 3 7 18 17 12 3 2 0 5 10 15 20 M1 M2 M3 M4 M5 Revenue Assurance Function Maturity Levels (cont‟d) Number of respondents Maturity level Source: Global revenue assurance survey by Ernst & Young, 2009 46© Datahouse Consulting
- 47. The Revenue Assurance Strategy: Insight Why have a strategy? The need for a Revenue Assurance strategy which is in line with, and integrated into, the overall risk management framework of an organization should be an obvious point. By having a documented and publicized strategy, the goals and purpose of the Revenue Assurance function help other departments within the business clearly understand what Revenue Assurance is trying to achieve and why Revenue Assurance should be embedded into the operating processes of the business. This understanding is critical in delivering improved revenue capture, as without buy-in to the strategy, the goals of Revenue Assurance will simply not be achieved. 47© Datahouse Consulting
- 48. In its early stages, Revenue Assurance tends to focus on revenue 80% 60% 40% 20% 0% Revenue Assurance Strategy 100% M1 M2 M3 M4 M5 leakage and fraud. As it becomes more mature, Revenue Assurance Profitability enhancement gets increasingly involved in cost reduction matters. Cost reduction Fraud Revenue leakage Maturity level Source: Global revenue assurance survey by Ernst & Young, 2009 48
- 49. The Revenue Assurance Function is well empowered within the Organization Reporting line of the RA function Reporting to the CFO or CEO gives Revenue Assurance access to senior management: • In most organizations, Revenue Assurance sits under the finance function and reports directly to the CFO. • Championing of Revenue Assurance by the CEO/CFO is crucial to its success. In some organizations, changes in sponsorship however continue to affect RA‟s influence across the business. …But Revenue Assurance managers still cite influence as a key challenge: • Although most Revenue Assurance managers are CFO -2 levels and above, almost half cite their lack of influence as a key challenge. Chief Financial Officer Chief InformationOfficer/IT Director Headof Internal Audit/Audit Committee Chief Executive Officer Risk and Compliance Manager Billing Manager Chief Technical Officer Revenue Assurance function positioning in the C-Suite organization Same level Level -1 Level -2 Below level -2 4% 6% 2% 4% 6% 12% 66% 43% 40% 13% 4% Source: Global revenue assurance survey by Ernst & Young, 2009 49
- 50. Two conflicting factors impact Revenue Assurance's positioning: The need for across departments influence …And the sometime inadequate hierarchical positioning of Revenue Assurance within the organization which could limit RA‟s ability of action. Technical departments (billing, IT, network) are key collaborators, together with Finance. It is believed that Revenue Assurance should: Operate as a subset of enterprise risk management …And benefit from formal links with the internal audit, risk management and compliance functions. More mature RA functions maintain strong ties and synergies with other risk management functions. 0 10 20 30 40 50 60 70 80 90 100 Other Customer care Internal Audit Sales and Marketing Risk and Compliance Regulatory Finance Billing IT Network operations Involved Ad hoc Collaboration with Other Departments is Progressing, But Challenges Remain Collaboration level with the RA function Source: Global revenue assurance survey by Ernst & Young, 2009 Less than 40% of respondents have a continuous relationship with internal audit, less than 30% with risk and compliance, and less than 20% with regulatory functions. This lack of linkage makes it harder to implement a risk- based Revenue Assurance strategy. 50
- 51. People Capabilities of Revenue Assurance What determines RA skills needs? The wider the product mix, the greater the need for a mixed skills group The more skills, the greater the size of the department and the greater the need for multiple applications in order to provide coverage and assurance across the various product streams Do you have to be able to respond quickly and adapt to constant change? Do you need to ensure an appropriate presence and input at senior Level and across various Change forums? 51
- 52. Billing, IT and Technical are Revenue Assurance teams‟ key skills: Around 75% of respondents have expertise in billing solutions and network, traffic, and switching. Despite this, Revenue Assurance is seen as a finance function: The balance of skills will depend on the scope of work delivered by Revenue Assurance. Start-up Revenue Assurance functions often use consultant roles to identify areas for improvement, plus basic technical skills. More mature Revenue Assurance capabilities start specializing in specific areas. Reporting may be overlooked in the RA function‟s early days, but is a powerful tool for gaining influence. 60 70 80 Billing Solution Subject Matter Expert Network, Traffic, Switching Subject… Accounting Data Mining Subject Matter Expert Auditing Fraud Subject Matter Expert others The Skills Paradox: A Finance Function with Mainly IT, and Technical Competencies Revenue Assurance people core skill 90 % 0 10 20 30 40 50 Part of the Core Finance Risk and Compliance Function Audit-like Function Function within Billing Policing Funtion Function within IT or Network 0 10 20 30 40 50 Functional perception of the RA function % Source: Global revenue assurance survey by Ernst & Young, 2009 52
- 53. A substantial majority of respondents believe they are doing quality work, have sufficient competence and knowledge, and are given enough responsibilities and challenges. The idea that having a Revenue Assurance function adds value to the organization has yet to be proven. The industry is struggling to recruit people with the full range of skills needed. Automation and implementing the right tools are key for RA teams to focus on value-added activities, and to establish an end-to-end capability. Influence remains a key concern, reflecting the potential conflict between RA‟s need for across departments authority and its position in the hierarchy. Budget Available Availability of Resources (People) Effectiveness of Tools However, they face four key challenges: Influence and Authority Quality of Work Performed Competence and Knowledge Scope and Responsibilities Medium High Excellent Continue Demonstrating it brings added value Automation Knowledge Senior Management Awareness Power, Influence, and Authority within the Organization Budget Others Value Contribution, Automation, and People are the Top Organizational Priorities RA performance self-assessment Low Poor Revenue Assurance challenges 35 30 25 20 15 10 5 0 Source Global revenue assurance survey by Ernst & Young, 2009 53
- 54. Key Factors to be Considered • Collective responsibility for revenue assurance – the root cause for revenue leakage being the lack of coordination, it is important to have a separate team with clear responsibility towards revenue assurance. • There should be a framework document for the revenue assurance activities. The revenue assurance team should come out with a framework document with due consideration for measurements and best practices • The revenue assurance team should also consider the external events related to the reliability factors such as system failures, their impact and the effectiveness of the contingency procedures. • Tracking and reporting as specified in the framework document should be strictly implemented. 54