ITU / BDTBDT- COE workshop
Bangkok, Thailand,
11 – 15 November 2002
Network Planning
Lecture NP
NP-- 3.6
Business Planning
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 1
Content Chapter 3.5
• Role of business Planning today. Basic concepts
• Telecom business modeling
• Typical evaluation results
• Main actions to increase performance ratios
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 2
Planning Methodology:
Integrated Iterative Planning Process
Analysis of
Initial Context
Business
Assessments
Generation
of
Competitive
Scenarios
(Inputs)
Technical
and
Economic
Results
Traffic Demand
Forecasting
Network Design
& Configuration
Business &
Financial Planning
(Outputs)
Procedures and Tools
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 3
Definition of business plan
A Business Plan presents the calculation of the financial indicators
that enable the managers to evaluate the financial performances of an
entreprise in order to take decisions.
A Business Plan summarises the results of the planning process:
• the objectives to reach ( subscribers demand, sales)
• the description of all activities requested by the project;
• the future revenues expected from the project;
• the planned expenses (investment and operations);
• the accounting statements and the financial indicators
characterising the profitability of the project.
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 4
Types of business plans
plans
Strategic Business Plan for evaluating a strategy:
• aid for making internal decisions for the whole company
(strategic guidelines at the national level, all markets)
Tactical Business Plans for specific projects :
• aid for making internal decisions for a particular area, or a
market segment: IN, mobiles, IP
Short term Business Plans for management control :
• aid for monitoring the implementation of projects
• preparation and follow-up of budgets,
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 5
Iterative process for evaluation
Strategic objectives, strategic guidelines
modifications
Marketing planning
modifications
Network planning
modifications
Operations planning
Human resources
planning
modifications
Business Plan
Evaluation
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 6
Interaction between analysis and
business plan
Business Plan
Analysis
Costs models
Revenues
Financial indicators
Evaluation
Sensitivity studies
SWOT
Pricing
Service portfolio
Technologies used
Action plans
what parameters to improve, how to adjust models
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 7
Business model structure
Demand
Human
Resources
Tariffs
Corporate
Customers
Revenue
Ordinary
Customers
Revenue
CAPEX
OPEX
Evaluation with Ratios and financial indicators :
NPV, IRR, pay-back, EVA, ROCE
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 8
Business model:
Services Revenues calculation
Customers Services
Telephone
connection fee
rental fee
local calls
ld calls
idd calls
Leased lines
Mobiles
Data
Added
value
services
Total Revenues
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 9
Business model :
Expenses calculation
Customers
Services
Network
construction
operations
extension
Customer Care
provisioning
repairing
call center
CAPEX
November 12th
Labour Costs
Marketing
Billing
Administrative
& general costs
OPEX
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 10
Business model:
Financial Statement
o
o
o
Income Statement:
Net income = revenues - expenses
Balance Sheet:
Company capital = Assets - liabilities
Cash flow statement :
Cash balance = Inflows - outflows
All fundamental financial indicators are carried out
with the elements of these 3 statements
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 11
Business model
Financial indicators calculation
The most useful economical indicators are :
- Net present value (NPV)
- Internal rate of return (IRR)
- Discounted Payback period (DPP)
- Net cash flow (NCF)
- Discounted cash flow (DCF)
- Operating income
- Revenue per service/service class
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 12
The purposes of
the accounting statements
Income statement
to analyse potential profit
is the profit enough ?
Balance statement
to analyse the financial structure
how to finance the development
enough / too much equity ? Enough/ too much debt
Cash-Flow statement
to make payments at every due date
to have the rigth cash at the rigth time
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 13
Business model
Income statement
OPEX
Revenues
-
CAPEX
+
EBITDA
Depreciation
Taxes
-
Earning before income taxes,
depreciation and amortisation
--
EBIT
Earning before interests,
and income taxes,
Net Income
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 14
Business Model
CAPEX: Capital Expenditures
CAPEX contribute to extend the fixed assets, and they
are depreciated over an economic life time
CAPEX are necessary for extending the business or
for improving the range of services provided by the
operator.
Examples :
• Purchase of land & buildings,
• Network construction
• Purchase of information systems (hardware & software )
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 15
Business Model : Importance of Modeling
Full capacity cost
Cost per unit
Economy of scale per technology and size
u1
u1 = a1+ B1 / S
u2 = a2+ B2 / S
u2
m1
m2
X
M1
M2
t1 = a1S + B1
t2
t2 = a2S + B2
t1
m1
Equipment size
m2
X
M1
M2
Equipment size
Impact by occupancy or fill-in degree
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 16
Business Model : Importance of Modeling
Cost per line ( Monetary units)
Economy of scale per location
300
250
Metropolitan total
Metrop. infrastructure
200
Suburban total
150
Sub. infrastructure
100
50
2 477
2 235
2 355
2 112
1 990
1 870
1 747
1 625
1 504
1 381
1 259
1 139
894
1 016
774
651
529
0
Density (subscribers per KM²)
Cost Impact by customer density (NPV)
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 17
Business Model : Importance of Modeling
Cost per Line (Monetary units)
Economy of scale through time
Price per line for two Greenfield scenarios
1 200
1 000
800
Suburban
600
Rural
400
200
0
0
1
2
3
4
5
6
7
8
9
Years since start
Impact by customer volume
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 18
OPEX= Operations Expenditures
OPEX
OPEX are expenses which don't contribute to extend the fixed
assets, and consequently are not subject to depreciation
OPEX are necessary for running the company,
- Technical operations (switching, transmission, local loop,..)
- Commercial operations (marketing and sales)
- Administrative operations (support,..)
Examples :
- Labor costs for operations,
- Travelling expenses, periodic administrative costs,
- Rental of equipment, rental of cars, rental of buildings
- Interconnection fees
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 19
Business Model : Importance of Modeling
Deployment Strategies
C: Balanced betwen COOP
and demand satisfaction
Equipment Deployment:CAPEX
Solution B
(Once for all)
B: High risk,
CAPEX
and OPEX
Solution C
(Optimized)
Solution A
(yearly)
Demand
forecasts
A: High OPEX by installation
costs risk to satisfy demand
Years
Major impact on CAPEX and OPEX
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 20
Business model
Income statement
Cost of
sales
Total
revenues
(sales)
Operating
expenses
Gross
margin
Income
from
EBITDA
operations
Depreciation
Taxes
Interests
EBIT
Other
incomes
earnings
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Dividends
Net
income Retained
Lecture NP - 3.6 - slide 21
Business model
Cash Flow
Inflows
Revenues, funds
Cash
balance
Out
flows
November 12th
IRR
NPV
CASH FLOWS
OPEX
CAPEX
Working
Capital
changes
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Taxes
Lecture NP - 3.6 - slide 22
Business model
INFLOWS and OUTFLOWS
Customers
Shareholders
Sales of services
Increase of equity
(operating income)
(capital increase)
Banks, lenders
Increase of debt
(credit, loans)
INFLOWS
cash flow
OUTFLOWS
Labour
costs
Training
Technical
Network
& admini&
equipment strative
Debt
repayment
with
interests
Tax
expenses
Staff
Suppliers
Service
providers
Government
Dividends
Shareholders
Banks,
lenders
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
November 12th
Lecture NP - 3.6 - slide 23
Network Solutions Optimization
Example for whatwhat-if economical analysis
Network NPV for new multiservice network operator
Effects of the mix of services on Reference Scenario ( Low Competition)
7e+08
4
6e+08
1
5e+08
Internet
4e+08
2
2
Internet &
VoDSL
Euro
3e+08
3
3
Internet &
Video
2e+08
4
1e+08
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
0e+08
Y10
All
Services
(reference)
1
-1e+08
-2e+08
Year
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 24
Network Solutions Optimization
Example for whatwhat-if economical analysis
Network NPV for new multiservice network operator
Effects of the mix of services with decreased revenues (30%) in High Competition
5e+08
4
4e+08
1
Internet
2
3e+08
2
Internet &
VoDSL
2e+08
Euro
3
Internet &
Video
1e+08
3
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
4
Y10
0e+08
-1e+08
-2e+08
November 12th
All
Services
(reference)
1
Year
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 25
Typical guidelines
for Cashflow improvements
• To increase the number of new customers
• To keep the loyalty of present customers
• To increase the sales of new lines
• To introduce new services/service bundle in the
portfolio
• To increase the paid revenue per customer
• To minimise expenses by improving management
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 26
Typical Action plans
for Cashflow improvements
To improve the customer segmentation,
better identification of major accounts
better statistics for each market segment
To carry out market research studies
Impact of potential competitors on the market shares
To carry out customer satisfaction surveys
To improve the Portfolio of products and services,
Impact of new technologies (internet, mobiles, satellites)
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 27
Increasing the sales of new lines
Waiting list management
where are people waiting for new lines
Field survey
where are people who will demand a line later
Construction of complete lines ready to sale
how matching capacity and demand
Sales promotion
how to speed up the sales of available lines
Service provisioning
how to speed up service delivery
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 28
Service provisioning
• Objective : to speed up service delivery
Many types of units are involved in the process and must be coordinated :
- administrative tasks for the commercial file
- billing file to be activate
- charging system in the switching unit
- customer care
- open-wire to be installed and connected
- MDF (main distribution frame) to be updated
- CPE to be installed and connected
November 12th
ITU/BDT-COE Network Planning/ Business Planning - O.G.S.
Lecture NP - 3.6 - slide 29