In Western countries, capex decisions are among the most difficult themes for telcos. It’s not rare to see the most advanced operators make foolish decisions like investing in desolate locations or in areas where population density is high but consumption and purchasing power are low. The main reasons are threefold:
- Multiple decision criteria. They used to be based mostly on technical criteria such as network coverage or 3G/4G coverage, but return on investment (ROI) also depends on commercial data. As Ruediger Schicht from the Boston Consulting Group recently suggested in a post, customer satisfaction is key, and it’s not necessarily linked to network performance. Depending on their location and activities (e.g. living in rural or urban areas), clients’ expectations can vary a lot, and correspondingly, their satisfaction level.
- Decisions made in silos. Depending on technology (fiber, cable, mobile), investment decisions are often made separately, although the client does not differentiate between the type of network used. Whether he sits in his office, in his car, on the metro, or in a shopping mall, he wants the best service possible. Again, the challenge is to identify the locations where service improvements will lead to the maximum increase in satisfaction…and consumption.
- No feedback on ROI. Capex decisions are typically based on ROI projections that are not monitored afterwards. But feedback loops are crucial to make capex management a dynamic process. For example, let’s consider that you identify two areas with coverage problems. It’s possible that solving the problem in one area will positively affect the other because of the clients’ mobility patterns within the region. In this case, closely monitoring ROI allows better resource allocation.
Since customer satisfaction is key for capex decisions, the main question is: how do you measure it? Customer surveys may seem like the easiest way, but they are not the most efficient. They are costly, intrusive, the sample might be not representative enough, and last but not least, it’s a one-shot, static picture, whereas satisfaction is a constantly evolving parameter.
In fact, most of the data reflecting customer satisfaction already exists at telco level, but in hidden or underutilized data sources. Mixing and enriching data coming from call centers, network performance centers and Call Detail Records (CDRs) creates more valuable insights about customer satisfaction than a survey because it’s dynamic and can be directly linked to customer value. From a financial perspective, that value is much more important than satisfaction itself.
For example, you might think that low network performance in an area populated with low value clients is not an issue. But as you realize high value customers cross it every day during their commute travels, you will probably decide to invest there because the expected ROI is in fact quite high.
Capex management is obviously an optimization process. Given technical and commercial constraints, how should the telco maximize its return on investment while minimizing capex spending over time? It’s important to realize that the telco itself has the responsibility to define the type and level of constraints, following its own strategic priorities. The balance between technical and commercial constraints will indeed depend on the telco’s size, positioning, client base and on its long term strategic orientation. So while one telco may put 90% of its focus on the Net Promoter Score, another may adapt network deployment to client mobility patterns and a third might want the best 4G coverage on its market : it’s all good. The trick is to continually track customers’ value, collect and analyze ROI feedback and in effect, make capex management a truly dynamic process.
by Sébastien Deletaille, co-founder and CEO at Real Impact Analytics