Over the last couple of years I have been focused on identifying sustainable business models for communication service providers. As part of this analysis I have investigated the return on invested capital (ROIC) as a ratio of weighted average cost of capital (WACC) for a variety of service providers globally. The Exhibit below summarizes the results for several Tier 1 service providers. For the sake of comparison I included companies that are not telecom providers, including Walmart, Procter and Gamble, RIM and Nokia and Visa.
The WACC essentially represents the minimum rate of return that a company must achieve before it creates value for equity and debt holders. In cases where the ratio of ROIC to WACC is less than one, we are essentially seeing capital value erosion. A variety of household names including Verizon, Vodafone, Comcast and Deutshe Telecom fall below the line, ATT is on the line, and players like Orascom and American Movil, Telstra, Telefonica and Orange/FT are in positive territory. Players who are doing well all have significant emerging market assets from which they drive disproportionate capital value creation?
With service providers coming under continuous pressure to offer more for less, capital value creation is a challenge, and generally depends on effective transformation strategies. Although service providers have made efforts to transform, most have failed. In several recent studies I have investigated why we have seen such lackluster performance in these transformation efforts.
To support this analysis, I formulated a scorecard which analyzed the service provider business in terms of six categories, namely their access networks, core networks, organizational structure, IT infrastructure, financial state, and partnership ecosystem. Based on this analysis, I came to the following conclusions:
Service providers tend to have straddled strategies with conflicting objectives. On the one hand they want to embrace the next 2.0 that comes along. On the other hand they are incapable of self-disintermediation needed for the 2.0 initiatives to thrive.
Employees must be incentivized to transform the business. Even with the best intentions and network technology investments, status quo will prevail unless remuneration is tied to transformation initiatives
Transformation strategies are overly focused on the access network evolution. These are long lead investment items, and while they impact transformation initiatives, they do not drive transformation.
Transformation starts with organizational re-engineering that incentivize self disintermediation, followed by strategic IT investments to reduce transaction friction for broader ecosystems. Until service providers take this approach, we believe that many will continue to see capital value erosion.
Does anyone have any simple EEM Scripts handy that can shut down a bgp neighbor based on syslog entry? Right now I have some IPSLA's and track statements setup, but am clueless on the EEM part. (It was so much easier in regular IOS) all I want i...
In the setup, there will be 2 x BGP routers capable of doing up to 400g routing (non-cisco) and 2 more BGP cisco routers capable of doing multiple 10g routing. In day to day operation, definitely, there won't be such a crazy amount of traffic. Just f...
Hi, Is there anyone configured cisco communication manager (CUCM) for direct calls to SIP Trunk provided by the Service Provider (Without Voice Gateway or CUBE)? I am looking for configuration steps Thanks
Hi, I might be missing something, but for some reason IOS XRv 9000 (7.2.2) doesn't seem to impose an inner (VPN) label to transit traffic only. For traffic that originates from the IOS XRv 9000 itself it seems to be working as expected. Sim...