sharpening revenue assurance capabilities in the digital and

Sharpening revenue assurance capabilities in the digital and converged space

Telecom, media and technology

Our revenue assurance advisory solutions

Contents

Rapid maturity assessment and benchmarking 4Revenue assurance strategy and target model 6Analytics driven revenue assurance/revenue finder 8Product margin assurance 10Migration assurance 12Customer churn assurance 14Control framework review, implementation and automation 16Revenue assurance dashboard and KPI reporting 18Fraud analytics 20

I 1Sharpening Revenue Assurance capabilities in the digital and converged space

2 I Sharpening Revenue Assurance capabilities in the digital and converged space

Background and context

Product characteristics underpinning financial leakages:

• L arge custom er base• M ass transaction• P roduct catalog com plex ity• P rocess and I T com plex ity• I nvolvem ent of m ultiple third parties

T he telecom m unications industry rem ains a f ast- m oving and com plex ecosy stem , w ith operators f acing a rapidly evolving technology landscape that has m any new challenges and opportunities. Additionally , an underly ing shif t is tak ing place: telecom providers are investing in m edia and digital services, w hile m edia and digital service providers are investing in com m unications. O ver- the- top ( O T T ) and digital services are becom ing increasingly popular w ith custom ers, w ho are dem anding higher- q uality data services that are placing increased traffic requirements on providers.

W ith declining m argins and new opportunities/ services on the horiz on, operators’ success cannot rely solely on state- of - the- art networks: technology alone will not guarantee benefits for telecom companies. By 2020, EY predicts a 50% increase in customers’ time spent online, with 75% of that time on mobile devices. Operators need to monetize the large amounts of data flowing through their netw ork s by data propositions, pricing and charging m echanism s.

Operators are moving from transaction-based charging to “flat data” packages; these offerings are actually complex, with bundled services rated and priced dif f erently w ithin the sam e pack age. T o accom m odate digital services, propositions are evolving tow ard unlim ited data plans, w hich m ay be either f ree or priced based on the user’ s ex perience. O perators m ay even of f er sponsored or z ero-rated data propositions w here usage is billed to the sponsoring com pany and not to the custom er. F or these reasons, operators need to f orm sophisticated agreem ents and partnerships f or digital services, enable the creation of applications, and of f er businesses an accessible platf orm and capacity to reach telecom custom ers.

What does this mean for revenue assurance?

Revenue assurance (RA) was conceived as a risk mitigation solution about 15 years ago in response to the constantly increasing com plex ity of the telecom value chain and grow ing revenue leak ages.

T he recent industry shif t tow ard convergence w ithin the telecom , m edia and technology ( T M T ) industry and the em ergence of other entrants such as O T T play ers m ak e it m ore necessary than ever f or providers to ensure their revenue assurance strategies are robust — indeed, it is also relevant f or the w ider ecosy stem .

T he converging ecosy stem is disruptive and a challenge f or revenue assurance prof essionals, w ho w ill need to m ove bey ond their traditional scope, perhaps beyond their “comfort zone.” Although telecom providers (and revenue assurance functions) have invested heavily on voice and SM S services, they are now called upon to assure the data product revenue stream s. Revenue assurance w ill theref ore need to m itigate risk s and plug leak ages in new products and services and contribute in m argin im provem ents. M oreover, revenue assurance will need to optimize its operations and “step up” to contribute to the required returns on investment (ROI).


revenue assurance strategy and target operating m odel

Custom er churn assurance

Where am I? What do I want to achieve?

Step 2: Operational objectives

Step 3: ActionsStep 1: Rapid maturity

assessment

Set up a w orld- class revenue assurance f unction

Rapidly assess the m aturity of the revenue assurance f unction to

understand the current state and f orm ulate a grow th road m ap

Ensure that all major revenue leak ages have been covered

Analy tics- driven revenue assurance/revenue finder

Ensure complete control coverage through a thorough f ram ew ork

P roduct m argin assurance

I m prove revenue assurance capabilities

M igration assurance

Deliver increm ental value to other com pany f unctions

Ensure BSS/OSS* transformation

Control f ram ew ork review , im plem entation and autom ation

RA dashboard and K P I reporting

F raud analy tics

How do I get there?

New strategies are needed to put proactive and profit-enabling revenue assurance capabilities in place — in practice, this will m ean dif f erent things to dif f erent operators or service providers. So the q uestion rem ains: how can the service providers in the w ider T M T ecosy stem ensure a proper revenue assurance setup?

T he best w ay f or service providers in the w ider T M T ecosy stem is to start w ith a rapid m aturity assessm ent and to set clear goals and objectives with respect to capabilities needed to form a robust revenue assurance framework.

Below is a simple three-step “cheat sheet” for setting up potential objectives and respective actions.

Illustration: RA cheat sheet for setting up objectives and actions

Focus areas for revenue assurance

T he f ollow ing pages cover a detailed description of the solutions against each of the action plans show n in Step 3 above, together w ith suggested approaches and leading practices on how to im plem ent them .

* Business Support Systems/Operating Support Systems


Rapid maturity assessment and benchmarking

Typical challenges faced

• U nclear revenue assurance objectives

• L ack of benchm ark s to assess m aturity and drive actions

Why should it be done?

• T o create a baseline f or revenue assurance against leading practices

• T o help develop a robust road m ap

Value added

• Clear view of the current state of revenue assurance and target m aturity

Solution overviewRapid m aturity assessm ent and benchm ark ing are designed to provide a baseline and benchm ark against selected service providers of f ering sim ilar services. I t provides the com pany w ith a clear view on w here its revenue assurance is and w here its revenue assurance could be (always aligned with the company’s business goals, of course). The rapid assessment is the first step in designing a w inning revenue assurance strategy . O nly by understanding ex actly w here som eone stands and w hat ground has been already covered can they plan and design the w ay f orw ard.

T he illustration above describes the ty pical lif e cy cle of a revenue assurance f unction, f rom early f orm ation to best- in- class perf orm er. As the team and capability evolve, so does the RO I , w hich is usually high at the initial phase. T his is w hen the f unction is established, high risk s are covered in early stages and large leak ages are plugged.

At later stages, revenue assurance widens its scope and eventually becomes a reliable profit and control center for the company. This can be achieved only through looking for incremental opportunities and further adopting a cost, cash and margin agenda, not just revenue. Even mature revenue assurance functions can benefit from “restarting RA” when a new product line emerges.

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Illustration: EY revenue assurance Maturity Model and life cycle

1 2 3 4 5EarlyStrategy• N o f orm aliz ed strategy

Organization• P ersonal initiatives or

sm all team s

Process and technology• Reactive and instinct-

based revenue assurance activities

• Substantial m anual ef f ort

Strategy• Som e revenue assurance

success

Organization• Early formalization of

the revenue assurance f unction

Process and technology• Basic revenue leakage

related task s perf orm ed

Strategy• F orm aliz ed strategy and

influence at executive level

Organization• Defined and recognizable

team f ocusing on revenue assurance activities

Process and technology• Major revenue assurance

processes covered

Strategy• F orm aliz ed strategy

elem ents of group integration

• P rovision of cash, cost and revenue m ax im iz ation

Organization• Revenue assurance

activities dissem inated into the organiz ation and m onitored by the revenue assurance team

Process and technology• All revenue leak age and

f raud processes covered• Major cash and margin

activities covered across value chain

Strategy• Strategy is risk - based,

includes cost reduction param eters and is integrated w ithin group

• It is considered as a profit center

Organization• Revenue assurance

prim arily undertak es a m onitoring and advisory role and guides on cash and m argin issues

Process and technology• revenue assurance covers

revenue, cash and m argin leak ages

Recurring Established Adm inistered O ptim iz ed

ROI

Revenue assurance evolution curve

Control implementation Control

automation

KPI implementation

Embedcontrols Detective

leakage

Incremental opportunities


Approach• T he rapid assessm ent of each m aturity level spans three pillars: strategy , organiz ation, and processes and technology .

• T he rapid assessm ent includes insights and inputs not only f rom revenue assurance m em bers but also f rom stak eholders accros the com pany .

Case study

Illustration: EY revenue assurance Maturity Model Assessment tool

• Conduct interview s w ith the revenue assurance team to understand how the current f unction is structured, their influence across different functions, tools used for detecting leakages, and reporting and operating processes used by the revenue assurance team

• Conduct cross-functional workshops with key stakeholders and understand how to use an “outside view” the revenue assurance roles and responsibilities

US$80m over five years

We conducted a rapid assessment for a large technology company offering business-to-consumer (B2C) services to assess revenue assurance req uirem ents against its peer group and assessed high- level capabilities req uired f or building the revenue assurance practice. T he w ork led to a proper business case and RO I m odel that resulted in a revenue assurance function that saved more than US$80m over five years.

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• Risk - based strategy• I ntegration w ith risk f unctions• Sponsorship and budget• Cross- departm ent buy - in• K P I m onitoring• Scope

• T ools• P rocesses• Dashboards

• T eam structure• V irtualiz ation• P eople and sk ills• Culture of ex cellence• Influence and authority

OrganizationStrategy

Process and technology


Solution overviewRevenue assurance f unctions need a clear vision f or the f uture aligned w ith the com pany ’ s strategy to ensure that they add maximum value. It is imperative that the strategy is tailored to the specific local needs and considers the key idiosyncrasies of the service provider.

Robust perf orm ance, delivery and corresponding RO I on investm ents in revenue assurance can be harnessed if the f unction is set up on sound f undam entals. Q uality design of the f unction w ill bring recursive returns as y our business ex pands.

Approach• Understand the company vision and product features, Operational Support System (OSS) and Business Support System (BSS)

architecture• Understand the revenues and cost flows and related processes• U nderstand com pany risk appetite and set target revenue assurance m aturity accordingly• Evaluate best practices of revenue assurance seen across telecom operators and other B2C technology companies• Develop a heat m ap view through interview s, w ork shops and process w alk - throughs on potential risk s related to revenue

assurance• Design revenue assurance strategy that will include objective and vision, budget allocation, KPIs for staff, risk assessment based

approach and scope of coverage

Illustration: RA strategy, target areas and actions

Revenue assurance strategy and target model 2


• RA f unction perceived as control- driven f unction vs. value- driven

• Insignificant, or unknown, RO I f rom RA f unction

• H igh cost f or providing revenue assurance


• T o provide clarity on developing RA strategy w ith an ROI and define robust target operating m odel

• T o enable support and investment for RA objectives

Value added

• Significant value from RA f unction and good RO I

• O ptim iz ed target m odel f or delivery

RA’s strategic imperative Target areas

Pre

cisi

onA

gilit

yEv

olut

ion

Key tenets to over achieve

• Saf eguard basic revenue streams• Establish billing accuracy• Ensure accuracy and timeliness of

service provisioning and its m ovem ent• Ensure precision of product catalog/

configuration, custom propositions and new product launches

• M itigate risk s pertaining to credit control and custom er abusive behavior

• I m plem ent revenue assurance strategy• Define visioning and scoping• O rganiz ation design• Conduct control gap identification and

im plem ent m itigation actions• Establish cross-functional role, presence

and involvem ent of RA• Create RA governance m echanism• I dentif y data points and regulariz e data

f eed f or basic controls

• Conduct third-party cost rationaliz ation • M onetiz e of opportunity losses• Ensure adequacy and accuracy of

product profitability• Ensure accuracy of channel payouts• Deliver z ero- revenue- loss network/IT

transformations• Provide sales assurance over lead

closure and enterprise pursuits

• Expand controls universe to ensure com prehensiveness of coverage

• Build automation environment for m onitoring of RA controls

• T ie issue escalation and resolution back to ERM framework

• Develop financial models to monitor and m aintain product m argins

• P ose strategic interventions on procurem ent volum es

• Seiz e incremental revenue opportunities ( up/ cross- sell)

• O ptim iz e working capital optim iz ation• Predict and reduce churn• O ptim iz e of production costs

N ex t w ave of RA returns w ill be unlock ed by em pow ering the f unction and encouraging an unrestricted agenda

• Network usage and rating• Billing• Order management and

provisioning• Customer acceptance and

risk management• Collections

• Channel and partner management

• Product design• Customer management

and disputes• Accounting

• Apply cognitive rules to com pute event- based risk propensity and f orecast occurrence of leak ages

• Create an advance RA agenda by link ing f unctional K P I s w ith P & L benefit identified

+

+

M aturity

N ascent

Accelerated I m pact

0–12 months

12–24months

24–36months


• P ropose the com pany - w ide role revenue assurance w ould play , the latitude in the activities the f unction shall undertak e and an overall directional view f or the f unction aligned w ith the overall strategy of y our business

• Make a quantitative business case justifying early revenue assurance investment• Conduct a cost benefit analysis to decide the optimal deployment, in conjunction with expected business growth; options

could include a centraliz ed f unction, one that is divisionally or f unctionally distributed, or a shared services center• Derive a best-fit organizational structure, supported by a detailed people and organization plan• Define operating policies and target performance metrics for the function• Calculate budget requirements based on various direct and indirect costs; this activity would include man power

estim ation in line w ith the proposed organiz ation structure• Consider and decide the revenue assurance approach to analy tics data access and business inf orm ation — this is k ey to

the function’s success and depends on the company’s attitude to “build vs. buy” on IT systems; all functions start with a “what’s available” approach to information, but it is important to get the strategic decision on this correct for success

*Models increasingly becoming popular with operators around the globe

W e have supported leading telecom operators and O T T play ers across the globe in assessing and developing revenue assurance strategy and target m odel. T he scope of w ork included assessing the revenue assurance coverage, related strategy , target m odel, organiz ation setup and related FTEs and budget.

W e are the outsourcing advisor f or a large integrated telecom service provider f or f our y ears. W e have a dedicated team of 4 0 + prof essionals w ork ing across and have helped the client re-engineer num erous processes, im plem ent revenue assurance tools, set up new SL As w ith user departm ents and f ram e m ultiple new processes journeys, which covered successful automation and new product launches coupled w ith technology changes.

Target operating model examples

First-generation service delivery models Second-generation service delivery models

In-house — traditional In-house — center of excellence (CoE) On-site co-sourcing* Selective offshoring* Complete outsourcing

Ope

ratin

g m

odel • T raditional in- house

decentraliz ed m odel • O perations

com pletely in- house w ith reporting elem ents draw n to CF O at a f unctional level

• Captive shared services based centraliz ed m odel

• RA CoE created centrally w ith a m ix of on- roll and of f - roll em ploy ees and product- based ex pertise

• Selective stream -w ide co- sourcing/outsourcing prim arily popular w ith new solutions, lack of sk ill set, deploy m ent of enhanced controls and global best practices, and geographical challenge

• Selective stream -w ide of f shoring of RA

• P opular w here on-site co- sourcing is costly / lack of locally available sk ill set

• Controls over service q uality and SL As

• Com plete f unctional outsourcing of RA activities

• M odel still nascent on account of regulatory and data security challenges

Ope

ratin

g el

emen

ts • H igh costs• L ack of best

practices and standard processes

• Challenges in building RA organiz ation of f uture

• Cost ef f ective w hen com pared w ith traditional in- house m odel

• O pportunity to create RA as a profit center

• Robust reporting process and f unctional SL As critical to success

• Speed to m ark et f or any challenges stated above

• Challenge of low sk ill set retention

• Shared inf rastructure

• Robust reporting m echanism a critical success f actor

• Cost ef f ective• Ease of resource

replacem ents and global best practices

• Strong data security and data integrity controls a pre-req uisite

• Regulatory dependent

• Cost ef f ective• SL A driven• Strong data security

and data integrity controls a pre-req uisite

• Regulatory dependent

Case study 1 Case study 2

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Analytics-driven revenue assurance/revenue finder

Solution overviewT he im pact of continued evolution of new products and their associated revenue and billing f ram ew ork s m ak es revenue assurance m ore challenging f or revenue assurance f unctions to im plem ent controls in all areas.

Additionally, many CFOs have started to demand that revenue assurance further contributes to the telcos’ EBITDA and cash flows. A revenue finder program is an analytical-driven program to quickly identify leakages, cost leakages and cash flow opportunities.

Approach• Engage with a local revenue assurance function from day one to start know-how and expertise sharing • L ook at the revenue cy cle holistically , of ten building upon w ork done by ex isting assurance and control team s• Engage with system and process owners for thorough walk-throughs and review of revenue controls and reporting• P erf orm advanced data analy tics using developed SQ L q uery ing and program m ing• P erf orm a range of core activities to identif y opportunities, including:

• Data analy tics • P rocess and contract w alk - throughs• I nvoice review s• Billing re-rating• Credit note analy sis

By taking an end-to-end view of the revenue cycle, our framework covers opportunities across optimization, assurance and realiz ation.

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Illustration: Revenue value chain assessment questionnaire


• Revenue f orecast errors• Slim m ing m argins• P ointers of revenue and cost

leak ages• N ecessity to broaden control

scope• Search f or increm ental

revenue opportunities


• To deliver business financial im provem ent

• T o provide clarity on the developing RA strategy to support RO I

Value added

• Adds opportunities ranging f rom 1%–3% of EBITDA

• Identifies opportunities across a w ide range of areas and also highlights w ork ing capital opportunities

Ref: 1011184

Revenue cycle heat map – enterprise

Mobile (voice, messaging,data)

Product and offerdevelopment

Product and offerchange

management

Marketing/campaign

management

Order intake

Customer riskassessment

Lead management

Customer changemanagementCustomer and

servicetermination

Customer andservice activation

Inventorymanagement

Bill timeliness

Allowances anddiscounts

Usageprocessing

Usage rating

Usagegeneration

Non-usage billing

Invoicemanagement

Payment follow-up

Dunning

Bad debtmanagement

Disputeresolution

Dealermanagement &commissions

Interconnection

Roaming

Wholesale/reseller

management

Content providermanagement

Completeness andexistence of

postingsRevenue

recognitions

Cost allocation

Accrued revenue

Contractcompliance

Care credits

Churnmanagement

Refundsmanagement

Reference datamanagement

Bill accuracy

Provisioning leadtimes

Fraudulent usagedetection

Credit approvaland limits

Refundsmanagement

Product designCustomeracceptance andrisk management

Channel andpartnermanagement

Ordermanagementand provisioning

Network usageand rating Billing Collections

Customermanagementand disputes

AccountingRevenue cycle heat map – cloud

Mobile (voice, messaging, data)



management

Marketing/campaign

management

Order intake


Lead management


servicetermination


Inventorymanagement

Bill timeliness


Usageprocessing

Usage rating

Usagegeneration

Non-usage billing

Invoicemanagement

Payment follow-up

Dunning

Bad debtmanagement

Disputeresolution


Interconnection

Roaming

Wholesale/reseller

management



postingsRevenue

recognitions

Cost allocation

Accrued revenue

Contractcompliance

Care credits

Churnmanagement

Refundsmanagement


Bill accuracy




Refundsmanagement






AccountingRevenue cycle heat map – digital

Mobile (voice, messaging, data)Product and offer

developmentProduct and offer

changemanagement

Marketing/campaign

management

Order intake


Lead management


servicetermination


Inventorymanagement

Bill timeliness


Usageprocessing

Usage rating

Usagegeneration

Non-usage billing

Invoicemanagement

Payment follow-up

Dunning

Bad debtmanagement

Disputeresolution


Interconnection

Roaming

Wholesale/reseller

management



postingsRevenue

recognitions

Cost allocation

Accrued revenue

Contractcompliance

Care credits

Churnmanagement

Refundsmanagement


Bill accuracy




Refundsmanagement






AccountingConsumers Revenue cycle heat map – consumers, mobile

Mobile (voice, messaging, data)

Ref Billing leakage point Description Rev Cash Cost Value RAG Ease Time6.01 Data lost between mediation and billing Any data lost or corrupted during file transfer between mediation and billing6.02 Bill not produced Leakage occurs when a bill for the serviced provided is not produced

6.03 Billing cycles not optimised for cash flow Inappropriate number of billing runs lead to substantial levels of accrued revenue and/or customers not proportioned evenly across billing cycles

6.04 Bills produced do not cover the services provided Fixed charges (including any concurrent charge loss) and/or new/upgraded equipment charges not applied to customer bills

6.05 Customer reference data missing from billing Inability to correctly charge for an event where customer data is required to identify the customer type, and this data is missing or corrupt

6.06 Bundle allowance applied incorrectly Usage events over-allocated to bundle allowance causing revenue leakage6.07 Discounts not applied correctly Incorrect discounts applied to customers on X tariff leading to lower billed values than appropriate6.08 Charges not applied to customer bill Fixed charges (including any concurrent charge loss) and/or new/upgraded equipment charges not applied to customer bills6.09 Manual billing inaccuracies Failure to correctly compile manual bills, resulting in charges being omitted from the bill (including equipment sales)6.10 Long duration between cut-off and invoice issue date Delays in processing calls and bill runs lead to lengthy timescales between cut-off and invoice issue date6.11 Terms not calculated from cut-off date Triggering terms from cut-off date rather than invoice produced date will minimise days within which customers should pay their bills6.12 Terms not applied correctly to bill Failure to correctly apply terms to invoices leads to customers being given extension to contractually agreed terms6.13 Print vendor does not receive all complete bills Bill not received by print vendor, and thus not sent to customer. Will appear as bad debt as revenue will still be booked in G/L6.14 Concurrent charging Loss Two simultaneous charges hit prepay customer account; one charge is not deducted

6.15 Re-credit raised in Prepay Billing System for sent SMS Prepay SMS flagged as not sent by SMSC and customer re-credited

6.16 ... ...



management

Marketing/campaign

management

Order intake


Lead management


servicetermination


Inventorymanagement

Bill timeliness


Usageprocessing

Usage rating

Usagegeneration

Non-usage billing

Invoicemanagement

Payment follow-up

Dunning

Bad debtmanagement

Disputeresolution


Interconnection

Roaming

Wholesale/reseller

management



postingsRevenue

recognitions

Cost allocation

Accrued revenue

Contractcompliance

Care credits

Churnmanagement

Refundsmanagement


Bill accuracy




Refundsmanagement

Product designCustomeracceptance &risk management


Ordermanagement &provisioning



Accounting

Additional proposed revenuestreams to be covered duringheat map development:► Roaming► Broadband► MVNO► Handsets► Managed services► Property

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Illustration: Revenue Value chain assessment questionaire


• Detailed documentation of findings, together with implementation recommendations/fixes• EY revenue finder framework is a four-stage approach typically spanning six to eight weeks:

• Opportunity identification• Opportunity validation and quantification• Benefits realization

Illustration: Revenue finder reports and outputs

We conducted a rapid revenue finder review to identify material areas of potential revenue leakage across all revenue streams and business segments. The review identified US$60m–US$260m, developed business cases f or individual initiatives and created the revenue assurance road m ap.

Case study

US$60m–$260m in potential savings

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1 0 I Sharpening Revenue Assurance capabilities in the digital and converged space

Product margin assurance

Solution overviewU nderstanding the product creation and delivery is a f undam ental stage f or increasing the num ber of custom ers, their satisf action and their retention. EY proposes a thorough post-factum review of products and marketing campaigns using advanced data analytics. As telcos m ove tow ard a subscription- based m odel vs. event charging m odel, it becom es m ore critical f or revenue assurance f unctions to establish a proper product m argin assurance f ram ew ork .


• L ack of visibility on product profitability/value leakage of products against the business case

• U nbalanced product portf olio — too m any products w ith low m argin

• Conf using of f erings to custom ers


• T o understand the assum ptions tak en and validity of products and cam paigns’ business cases by look ing at the product perf orm ance ( based on real data)

Value added

• M onitor product perf orm ance in real tim e

• I dentif y opportunities to rationaliz e products w ith low GM/EBITDA

• Improve profitability by stopping the least profitable products

Illustration: Advanced reporting of the unitary profitability of each single offer, including the network capex-related costs

Building on top of the performed analytics, the reporting is executed using the most advanced data visualiz ation tools, enabling f ast k now ledge ex traction and deep insights, such as identification of trends due to customer behavior, abuse and revenue leak ages.

T hrough proper product m argin assurance, the revenue assurance f unction can support com m ercial team s w ith the products and of f ers that are eroding value ( such as low -m argin or negative- m argin products) and help identif y q uick w ins. T his can develop better w ork ing relations w ith m ark eting and com m ercial team s.

O f f ers/ tarif plans

T arif f plan # 1

Prepaid PAYG standard

T arif f plan # 2

P repaid voice and data

unl.

T arif f plan # 3

P ostpaid voice and data

unl.

T arif f plan # 4

P ostpaid prom o handset

subs.

Tariff plan #5

P ost- dongle data unl.

# of subscribers 800k 2 0 0 k 1 0 0 k 1 0 0 k 1 0 0 k

ARP U ( U S$ ) 4 1 0 17.5 17.5 15

M oU ( m in) 175 min 250 min 500 min 500 min n/ a

Data usage ( M b) 1 0 M b 2 0 0 M b 500 Mb 500 Mb 1500 Mb

RP M ( U S$ / m in) 0 . 0 2 0 . 0 1 6 0.015 0.015 n/ a

P rice ( U S$ / M b) 0.05 0.025 0 . 0 2 0 . 0 2 0 . 0 1

Gross margin 1 (%) 90% 90% 85% 85% 100%

Gross margin 2 (%) 70% 70% 60% 45% 50%

Real profitability (%) 55% 45% 40% 25% 10%

T otal

prepaid

T otal

postpaid

1 , 0 0 0 k 1 0 0 k

5.5 17.5

2 0 0 m in 500 min

50 Mb 500 Mb

0 . 0 1 9 0.015

0 . 0 4 0 . 0 2

90% 85%

70% 55%

45% 35%

Gross margin 1 = Revenue – interconnect costs Gross margin 2 = Gross margin 1 – commercial costs – other variable costs Real profitability = Gross margin – fixed costs allocation – unitary network costs

Product margin dashboard

4

Identify quick wins / products for “cutting the tail” A

vg -

profi

tabi

lity

I 1 1Sharpening Revenue Assurance capabilities in the digital and converged space

Approach• V erif y product positioning vis- a- vis targeted custom er segm ent• Check accuracy of product configuration and corresponding benefit rendered to customer• Study current product structure, req uirem ents and com patibility of product portf olios• Evaluate whether current products addresses intended or defined strategy• Collect and prepare data using advanced SQL techniques, creating a product profitability diagnostics dashboard using

data visualiz ation techniq ues • Conduct analy sis of operational K P I s of products, such as:

• N um ber of subscribers per plan• Identical plan based on configuration parameters• Assessm ent of usage per subscriber per plan• Com plaints analy sis per plan• G o- to- m ark et/ sales cy cle/ I T developm ent tim e• P roduct/ plan m erger analy sis

• Identify quick wins/products for “cutting the tail”:• I dentif y obsolete/ inactive products to be cleaned straight aw ay • I dentif y m utually sim ilar products to be technically m erged in sy stem s

• Define full list of products for further strategic analysis• Conduct product profitability analysis to identify loss-making products

As part of a revenue assurance engagem ent, w e helped a large integrated service provider review its product portf olio and calculate the gross m argin percentage at both the product and custom er level. As part of the exercise, we identified many quick wins including, cost-saving opportunities worth US$20m and opportunities to reduce the total number of products by 50% — all while providing improved customer experience.

Case study

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US$20m in cost- saving opportunities


Migration assurance5

Solution overviewMigration of BSS or OSS involves the transformation of an organization’s existing (legacy or source) stack to a new one (target). Projects that migrate legacy systems are large, complex, risky and expensive, involving multiple stakeholders. Any migration project usually af f ects end custom ers and theref ore needs m eticulous planning and ex ecution — this is the design and aim of this solution.

T he illustration above show s a com prehensive and robust m ethodology , w hich is enabled through a stringent q uality assurance framework, applied throughout different phases of a project.


• Absence of project governance f ram ew ork

• L ack of com prehensive and q uality assurance test plan

• M anagem ent of custom er ex perience


• T o understand m igration w ith a structured and proven m ethodology

• T o evade costly and m ishandled transf orm ation projects

Value added

• Reduce transf orm ation ef f orts to m inim al levels, w ith critical risk s m itigated through the test plan

• G ain a m igration path w ith m inim iz ed business im pact

Timely risk mitigation and

readiness

Comprehensive migration plan considering all customer scenarios

Proactively managed customer experience

Accurate and complete migration

• F lash cut vs. phased m igration• U sage catch- up plan• Cutover planning• T oll gates and thresholds

• M igratable vs. nonm igratable• Data- cleansing ex ercise• Consideration of f unctionality

m ism atches

• Adeq uate test scenarios• P lan vs. actual testing delivery• I ssue capturing and closure • Adeq uacy of team deploy ed

f or testing• Sufficiency of validations planned• Autom ation of validations so that

the data m igration ex ecution plan is adhered to during critical w indow

• Subscriber ex perience handling during cutover in term s of availability of services

• Custom er com m unication plan

• Project management, delays and cost im pact

• I ssue reporting escalation, resolution

• Q uality assurance

Transformation

M igration plan

M igration scope

T est coverage

Cutover validation

plan

Business continuity

Project governance


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Approach• Begin by conducting appropriate tests to assess the quality and progress of your project. Our comprehensive approach is

f urther supported by the f ollow ing ex ecution enablers f or robust m igration assurance:• Program risk assessment tool kit to gauge confidence in the integrity of the business case and projected benefits and

to identif y program critical risk s and issues• Migration and testing checklists for “health checks” performed at specific phases of a transformation to support

tim ely and accurate delivery• Data analy tical tools to perf orm com prehensive validation of data points that can result in custom er ex perience

deterioration af ter go- live• Benchmarks and leading practices to support clients from migration planning to cutover

A Southeast Asian operator had to revisit its m igration plan and strategy half w ay into its transf orm ation exercise, inducing a delay of almost two years in planned project completion. Migration flow failed because the company lacked a proper approach and project management.

Pre-cutover/cutover Post-cutover

Migration plan review

Test plan review

Migration validations Health check

Key

acti

viti

esB

enefi

ts

• Review data conversion, cleansing and cutover strategies

• Review m igration rules

• Review business case assessm ent f or various decision points

• Review business continuity plan and custom er com m unications to be f ollow ed during cutover

• Early identification and mitigation of inherent risks• P lanned toll gates to f acilitate go/ no- go decisions

• Identification and rectification of any anom aly during actual cutover

• Early identification and rectification of any post- m igration anom alies

• Review test strategy• I dentity toll gates• Benchmark test

strategy w ith leading practices

• Review test scenarios f or adeq uate coverage

• Review thresholds and entry / ex it criteria established f or test including acceptance testing, end- to- end test, bill- to- bill test, data m igration rehearsal

• P erf orm activities defined in testing stage

• Report issues along w ith prospective im pact to custom er/revenue and recom m end resolution

• Recom m end k ey perf orm ance indicators f or reporting to m anagem ent and update on success

• Recom m end threshold f or go/no- go

• Conduct post-cutover analy sis to ascertain success of m igration and highlight any def ects leading to im pact to custom er or revenue

• I dentif y critical business param eters and perf orm trend analy sis

• P erf orm check s to indicate health of m igration

• Review custom er com plaints and the root causes and rem ediate them


6 Customer churn assurance

Solution overviewCustom er churn assurance is a solution built to address the m ost im portant underly ing aspect of any business — their custom ers. Com panies w ith capabilities f or gathering and analy z ing large am ounts of data should be better positioned to anticipate m ark et changes and m eet consum ers’ needs in innovative w ay s w hile enhancing this vital relationship.

I n the digital space, the f ocus f or m any com panies in the T M T sector is changing f rom direct revenues to connected users ( CU s) , w hich leads to indirect advertising revenues f or the service providers — new ventures of ten see CU s as a lead m etric. I t becom es very critical f or revenue assurance f unctions to develop com prehensive custom er assurance capabilities to proactively m anage CU churn m etrics and help business to im prove through this deep data analy tic sk ills.

“Knowing your customer” — that is what will ultimately decide who wins in the market. Taking the example of customer churn, churn rates req uire a deep- dive analy sis on the causalities by review ing custom er acq uisition, paid conversion and retention to im prove the churn prevention activities. By understanding the root cause of why customers leave, companies are then able to transform their of f ers f rom a large, standardiz ed approach to a m ore custom iz ed, targeted and individual of f er.


• Declining revenues• I ncreasing churn and

internal cannibaliz ation


• T o understand and connect the dots betw een custom er churn, subscriber m ovem ents, product choice and sales channels

Value added

• Reduce churn rate by 3%–8%• O ptim iz e the cost of

retention ef f orts


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Approach• Define and validate business objectives associated to churn/cannibalization (e.g., voice services cannibilazed by data

services, on dem and by pack ages)• Review ex isting custom er segm entation m odels adopted by the com pany• Co- develop and agree to a list of initial hy potheses f or churn/ cannibaliz ation by segm entation

• P erf orm an analy tic screening of the custom er base ( value, usage, tenure, etc. ) f or cannibaliz ation and churn based on the selected hy pothesis, such as:• Analy z e intra- prepaid m igrations ( betw een pack ages)• Analy z e voice/ SM S cannibaliz ation by data• Analy z e prepaid/ postpaid m igrations ( buy ing behavior)• Analyze “rotational” churn on prepaid

• Co- develop m ark et survey q uestionnaire f or assessm ent of churn/ cannibaliz ation• Provide market research team with detailed profiles that could be interviewed in order to get client insights for churn

and roll out the survey• Analyze survey results and identify main market/business/technical reasons that justify main variations• Develop a 10–15 key action plan for implementing a robust process to improve cannibalization and churn management

By redesigning early life customer experience, developing targeted churn treatment plans and creating a loyalty program , a w orldw ide digital services provider successf ully im proved its custom er churn m anagem ent processes and gained a financial benefit of US$12m.

Hypotheses Description Levers

Quality of sales — “fake” activations by distributors

• I ndirect distributors activate or pre- activate SI M s to get their sales rem uneration.

• I ndirect distributors resell prom otional credit of pre- activated SI M s.

• Review the com m issioning schem e of indirect resellers by including incentives based on quality of gross adds (~30% of the rem based on 3 - m onth ARP U )

• Monitor the “ghost”/“fake” activations in com m ercial reportings

Quality of sales — opportunistic “one time” users

• Com m ercial prom otions in acq uisition are too aggressive and incite opportunistic custom ers to m ak e auto- churn.

• Check consistency of acq uisition prom otions m echanism s

• Anticipate in the business case the cannibaliz ation im pact of acq uisitions prom otions on the ex isting custom ers ( auto-churn)

Non-controlled prepaid migrations

• Som e custom ers m igrate to a prepaid plan and generate less ARP U .

• Som e opportunistic custom ers constantly change their tariff plan to benefit from ad hoc advantages.

• Build a comprehensive prepaid offers portfolio w ith consistent advantages on each tarif f plan

• Define rules and migration matrix between prepaid tarif f plans

• Control the m igrations betw een prepaid tarif f plans

Non-virtuous stimulation campaigns on customer base

• T oo f req uent and/ or non- segm ented custom er base management (CBM) campaigns are cannibaliz ing revenues.

• Segm ent the custom er base consistently to run CBM campaigns

• Build a comprehensive CBM road map per segm ent

US$12m financial benefit


7 Control framework review, implementation and automation

Solution overviewT his solution is designed to tak e an in- depth look at the com plete value chain of the com pany through a m eticulous evaluation of processes and sy stem s containing potential f or leak ages. L ocating the m ain control gaps, understanding their im pact and becom ing aw are of potentially ignored areas are sure w ay s to deliver revenue assurance value.


• O ver and under invested in control coverage

• L ack of understanding of k ey risk s and associated controls


• T o bring clarity on the current risk coverage and control im plem entation

• T o address k ey risk s w hile achieving higher degrees of autom ation

Value added

• Gain proper control coverage

• Balance the control autom ation

• I m plem ent an optim z ed solution based on RA m aturity and investm ents

Illustration: EY Control Assessment and Benchmarking Tool

T he illustration above portray s one of our tools to rapidly review the ex isting control f ram ew ork across the com plete value chain. This process flows from assessment toward importance screening, control design and prioritization. Having a structured flow built in the grow th process ensures constant hom ogeneity and com prehensiveness in revenue assurance activity ex ecution, w hich w ill be stitched together w ith a revenue assurance activity governance structure.


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Approach• Deliver a solution by engaging w ith k ey stak eholders, analy z ing the risk hy pothesis, establishing procedures, designing a

governance structure and finally delivering control automation• Create a risk and control matrix of the current environment by assessing the “as-is” state and compare it against

industry leading practices that EY has observed• U se the m atrix to outline all k ey processes and risk f actors associated, tak ing adeq uate consideration of m anagem ent

req uests and f uture potential risk s• Develop req uired revenue assurance controls f ram ew ork• I dentif y autom ation opportunities f or the controls based on the assessm ent• H elp the business select the tools to im plem ent autom ated controls• Support in designing autom ation of controls

EY supported a large pan-European telecom operator in assessing its revenue assurance control framework and governance against leading practices. As part of the engagement, EY identified potential revenue risks across the value chain and developed a revenue assurance control f ram ew ork and road m ap to m itigate potential risk s.


8 Revenue assurance dashboard and KPI reporting

Solution overviewThis solution is designed to give senior leadership visibility into revenue assurance performance and benefits to senior leadership and help create influence in the business by showing where errors are occurring, benchmarking performance and monitoring progress, as w ell as prioritiz ing areas f or f ocus.

With the availability of new agile visualization tools (such as Tableau and Spotfire), these dashboards and automated reporting could be created in very short tim e scales w ithout deploy ing large classical revenue assurance tools, theref ore k eeping costs relatively low .

M ain categories of revenue assurance K P I s include:

• Data q uality : m easuring the validity , accuracy and coherency of data w ithin the operational sy stem s and databases, e. g. , m isaligned custom er records/ total custom er records

• Measuring the implications of revenue leakage on the bottom line, e.g., recovered and billed records/total billed records; the below table illustrates the different financial leakages and examples


• N o clear view on RA purpose and perf orm ance

• L ow visibility on problem atic areas


• T o k now w hat is going wrong in order to fix it

• To measure the benefits RA is adding by reducing the level of leak age

• To create influence for RA w ithin the business

Value added

• Measure the benefits RA is delivering

• P rovide visibility to other stak eholders and help increase influence

• P rioritiz e areas of f ocus

• Control effectiveness and efficiency: measuring the efficiency and effectiveness (result oriented) of the RA organization and RA practices, e. g. , solved RA incidents/ total RA incidents

• RA management: measuring the effectiveness and efficiency of individual controls , e.g., value of cases from control X/total RA cases value

Revenue assurance term

Opportunity loss Revenue leakage Overcharging Cost leakage Revenue at risk

Risk scenario Services not available f or custom ers

Revenue not collected f or a service provided

Extra amount charged over the agreem ents

Extra variable cost incurred f or delivering service

L ose collected revenue due to legal obligations

Examples P ay m ents not available due to outages

F ree calls m ade to countries not listed in of f ers

Duration of Call Data reports incorrectly calculated

H igher com m issions paid to affiliates

I ncorrect billing inf orm ation show n to custom ers

F inancial view L ow er revenue collected ( w ith avg. m argin)

L ow er revenue collected ( w ith 100% margin)

H igher revenue collected ( w ith 100% margin)

H igher cost incurred (with 100% m argin)

N ot visible


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T he diagram below show s an ex am ple of a dashboard developed to m onitor K P I s by senior m anagem ent staf f . T he revenue assurance dashboard containing high- level m etrics, detailed revenue leak ages by each control and a tool f or ah hoc analysis, which allows data to be easily manipulated using filters and available dimensions in near real time.

Illustration: Revenue Value KPI Dashboard

Approach• Subdivide the business into a series of theoretical control points f rom sales order- to- cash collection w here there is risk of

leak age• T he aim is to put tools, reconciliations and activities in place to q uantif y any leak age occuring at every control point• Each “gap” in knowledge is a potential source of loss

• Agree with the revenue assurance function and other stakeholders (including CXOs) on KPIs• Conduct w ork shops and interview s to m ap the K P I s w ith sy stem and data points• Develop a sim ple architecture using ex isting sy stem inf rastructure f or reporting and dashboard• Design the visualization layer using tools (e.g., Tableau and Spotfire) and define the process of reporting

W e helped a large m ultinational organiz ation design the revenue assurance K P I s and tools that could be leveraged to im pact the K P I s. W e also developed an autom ated dashboard f or m onitoring trends, K P I s and perf orm ance benchm ark s f or reporting to senior m anagem ent. T he engagem ent not only created transparency across the company, but also helped in creating influence across the senior leadership through impactful reporting.


9 Fraud analytics

Solution overviewAs m any of our large T M T clients start to of f er digital services, the risk s of online f raud have increased, especially w hen there are lim ited m ethods to validate the custom er com pared w ith previous m ethods.

The fraud analytics solution is based on the profiling and knowledge discovery in data techniques. It does not replace the existing f raud detection tools, but provides additional insights, f raud detection and prevention m ethods related to new digital products and organiz ation activities in cy berspace.

Example of fraud Description

Account surfing U sing accounts w ithout perm ission

Account tak e- over M ay be com bined w ith various techniq ues to becom e the account adm inistrator

Resale/ arbitrage/ abuse U sing accounts f or inappropriate com m ercial activities, e. g. , by pass operators

Impersonalization/spoofing Masking identity for illicit purposes; pretending to be another entity

Credit f raud M any w ay s to obtain card data used f or pay m ent charge- back s

Refunds and adjustments T argeting pay m ents m ethod to tak e over control of pay m ent accountsDigital fraud examples

The table above summarizes some basic potential fraud activities; however, the fraud threat landscape is much wider than that m entioned and includes account, pay m ent, supplier, partner, crim e f acilitation, technical and internal categories.

O ne of the techniq ues is to identif y f raudulent behavior patterns by com prehensively analy z ing transactional data so y ou can react in time to suspicious activities and prevent potential high-value frauds. When new behavior patterns are identified, they are used to identif y other custom ers ( or f raudsters) that have sim ilar behavior and theref ore are m ost lik ely to com m it f raud. Despite this classification technique, the following techniques are also effective in detecting frauds: outlier identification, identification of unusual entries, duplicate testing, gap testing, sk im m ing of num eric values, entry date validation, purchase scoring engine, continuous transaction m onitoring and others.


• F raud losses due to digital product of f erings

• Lack of skill sets


• T o prevent digital f raud and develop proactive capabilities to prevent f raud

Value added

• Reduction in f raud cost by 15–20% (including losses and charge- back f ees)


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Approach• Perform a diagnostic fraud risk management review of a company’s environment assessing it against the EY maturity

m odel• Q uantif y anatically and characteriz e the ex tent and siz e of threats• Quantify the level of profit leakage and wider costs incurred as part of risk management pipeline• Develop, configure and deploy solutions to remediate identified issues and lead education efforts about them• Define and implement a method that monitors and detects fraud suspects based on a behavior comparison using the

behavior attributes of the profiles of fraudsters previously detected by comprehensive data analytics

EY conducted a full fraud risk review of a digital selling channel for a major mobile device manufacturer. The assessm ent covered governance, strategy , people, processes and technology . T he w ork involved m ultiple on- site interview s w ith m anagers and technical staf f to assess w hether the stated strategy is aligned w ith technological capabilities.

Contacts

Brice Lecoustey P artner and G lobal revenue assurance Solution L eader +352 42 124 8368 brice. lecoustey @ lu. ey . com

Prashant SinghalP artner and G lobal T elecom Sector L eader + 9 1 1 2 4 6 7 1 4 7 4 6 prashant. singhal@ in. ey . com

Ajay BaliDirector +352 42 124 8172 [email protected]

Amit SachdevaP artner and G lobal T elecom Advisory L eader +91 124 6714870 am it. sachdeva@ in. ey . com

Ramanpreet SinghDirector +91 124 6711579 ram anpreet. singh@ in. ey . com

Dieter LangeExecutive Director +49 211 9352 20863 dieter. lange@ de. ey . com

2 2 I Sharpening Revenue Assurance capabilities in the Digital and Converged space

I 23Sharpening Revenue Assurance capabilities in the Digital and Converged space


Notes

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of EY Global Limited, each of which is a separate legal entity. EY Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

EYG No: EF0154

ED None

© 2015 EYGM Limited. All Rights Reserved.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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sharpening revenue assurance capabilities in the digital and

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