Rising revenue leakage is worrying
As featured on TM Forum’s the Insider Blog
Two very disturbing reports have come to light in the past week with regard to the state of revenue leakage among telecom operators worldwide.
The first, from KPMG, sourced its information direct from CSPs globally and claims they expect revenue leakage to increase in the coming years, and by a significant amount, as m-commerce, third party content and converged services continue to grow. The report also concluded that 94% of CSPs worldwide believe this to be the case, with 49% describing that increase in leakage as ‘significant’.
KPMG also claims that 20% of telecoms operators leak up to 10% of their revenues. Frightening thought?
The Africa and the Middle East regions are the worst affected, with 50% of operators there admitting to losing between 1% and 18% of revenues through leakage, with 18% of the total experiencing leakage of more than 10%. Europe and the Americas fare better with only 15% saying leakage is greater than 10%, compared with 10% in APAC. In fact, it seems that APAC is the best performer all round with 75% of operators reporting leakage of below 1%.
These figures are mirrored by the TM Forum’s own revenue assurance collaboration team that is seeing enormous RA activity in the region. However, it appears that only 40% of all CSPs retrieve more than half of their losses. At a time when every dollar counts, management must take notice of these substantial losses that directly affect the bottom line.
KPMG rightly surmised that revenue assurance and fraud management functions need to have influence at the very top of an organization. A view most RA people would solidly support. According to the survey, just one in five said their company’s revenue assurance function reports directly to the board of directors, while 54% admitted to not being fully satisfied with the communication between revenue assurance departments and senior management.
Another report from Juniper Research found that the global mobile telecoms industry lost more than $58 billion (€43.4 billion) last year - over 6% of global revenues - due to inadequate fraud management and revenue assurance processes. The report suggests that under a ‘nightmare scenario' whereby operators fail to implement any remedial measures over the next five years, the scale of losses could rise five-fold by 2016.
The report found that, as operators have been obliged to integrate an ever-expanding array of devices and to simultaneously manage a surge in cellular network traffic, billing systems have failed to keep pace. As a result, they are increasingly unable to accurately or efficiently capture the large volume of transactions that occur on the network. The complexity has magnified the scale of revenue loss, resulting in bad debts and a greater opportunity for fraud.
However, the report recommends that operators can minimize the outflows resulting from next-generation connectivity by implementing automated system solutions that provide end-to-end visibility of the revenue chain. This outcome may not be so surprising, as Juniper surveyed a number of software vendors for its report. Presumably, as a result of implementing those systems, the report finds that leakage will decline to 4% of revenue in 2016, representing a net reduction of nearly $15 billion per annum compared with 2011.
Other key findings from the report also conclude, like KPMG, that revenue leakages will continue to be relatively higher in developing regions, particularly in Africa & the Middle East. It also concludes that solutions are exploiting a single repository of data to reduce TCO (Total Cost of Ownership) and are integrating a number of complementary applications as the industry moves towards Business Assurance.
TM Forum members that have taken advantage of its RA suite of products, KPIs and benchmarking have had a head start in achieving higher RA maturity levels, as have a number of software solution suppliers that have undertaken Frameworx compliance certification. Maybe it’s time for RA to take center stage to capture these excessive leakages in both reports?