Post on 14-Aug-2015
transcript
Telecom Co Strategy to reach goals
01/31/2014
Team UCLA
Deloitte Consulting LLP
Pratiksha Barasia | Veer Bhartiya | Bach Dang | Bhavik Merchant
Proposal
Hypothesis
Recommendations
Financial Analysis
Risks and Mitigations
Conclusion
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Overview
Overview Attrition Churn Rate Expansion Risks
Hypothesis : By fostering a client and employee focused business model and expanding operations in Latin America,
Telecom will achieve its desired 2018 revenue target and reduce attrition and churn rates.
Problem Statement : Developing a strategy to reverse trend in falling customer and employee base while finding an alternative
to underperforming third party IT vendor
Mentorship Program
Renegotiate with ITCo.
Mobile Banking in
Mexico
Exit US and enter Brazil
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Employees leave the company to go to other competitors
Outsourcing IT to third party vendor
High churn rate
High employee turnover
Poor service quality, especially in Mexico
Lack of scope in the US market
Create Interdepartmental
Collaboration Environment
Reorganize office space to encourage
communication
Standardize Applications
Increase maintenance, data and server uptime
Renegotiate SLAs with ITCo
Situation
Complication
Answer
Human Capital Technology Strategy
Executive Summary
Divest US Operations
Expand into Brazil
Markets
Enter Mobile Payments Market
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Why Employee Happiness Matters?
Save on Recruitment and Training costs
Lower Turnover Rate Fewer absent days
Loss of productivity due to employee dissatisfactions costs the US $300B Increase productivity Higher Sales figures
Happier workers are 20% more productiveBetter networking and social support Happy employees make make happy
customers
Overview Attrition Churn Rate Expansion Risks
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Interdepartmental Collaboration
Managers and staff feel like
teamwork is
undervalued
Staff want a clear career
progression
Mentorship Program and working alongside team members from different departments
Redesign office spaces to encourage communication
Overview Attrition Churn Rate Expansion Risks
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Invest in experience
With our churn rate we lose $80M annually
A 5% increase in customer retention has been shown to translate into between a 25% and 55% increase in profitability.
A report estimated that reducing churn could increase earnings of a typical US wireless carrier by as much as 9.9 percent.
Overview Attrition Churn Rate Expansion Risks
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Improve Customer Care to Retain Customers
Client Centered Business Model
Improve IT services
-$13M loss due to poor IT services
-Renegotiate terms with ITCo
-Phase out ITCo if it does not improve service
-Look into more proficient companies like MAESTRO
Reward for purchases & referrals to new customers
-Lock in customers, create switching costs
-Offer deals and promotion schemes for valuable customers
-Customer review system tied to bonuses for managers
Overview Attrition Churn Rate Expansion Risks
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Telecoms retail revenue in Latin America will increase from USD142 billion in 2012 to USD167 billion in 2017 and the main areas of growth will be mobile handset data and broadband
Growth In Latin America
Source: www.analysysmason.com
Overview Attrition Churn Rate Expansion Risks
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Mobile Banking
Overview Attrition Churn Rate Expansion Risks
Revenue in millionsBank Rev/customer $100 Telecom Rev/Customer $5 % of subscribers for MB 20%# subscribers for MB 16 Telecom Rev from MB $90
Increases total revenue by 15% in 2014 itself.
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TELECOM CO’s US divestiture
Deal Estimation
Metro PCs Deal in 2013Market Share: 2.9%Transaction Value:
$1.5 Billion
Telecom COMarket share: 1.6%Transaction Value
$750m – $800m
AT&T, Verizon, Sprint, T-Mobile have 97% of US Market
- no room for growth - High switching costs
US cellular companies are trying compete to acquire more spectrum to improve their service.
Past Deal Value
Overview Attrition Churn Rate Expansion Risks
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Moving into Brazil
Why Brazil?
Large Market
Tim (27% market share) exiting
Positioned to grow 30% over the next 5 years
Government Liberalization and deregulation
Political Stability
Overview Attrition Churn Rate Expansion Risks
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Total Market Size : $ 25 billion
CAGR : 7%
Investment : 480mm
Target Market capture: 3.5-4%
Aggressive marketing
Acquire in 2015, 2020 Cash Flow = 150mm
NPV : $ 80mm, IRR : 13%
Brazil Markey Entry Financials
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Risks associated with the recommendations
Risks Solutions
1. Telecom Co can use that as leverage to negotiate high bids for their US segment
2. Government would like to improve the telecommunication service so as long as Telecom Co solve the service issue, it is a low risk with high growth rate business
3. The Brazilian government is keen to add FDI and develop infrastructure through telecommunications.
1. Low acquisition bids for US segment may affect company cash flow
2. Argentina government may nationalize the telecommunications industry
3. Brazil government is not on good terms with the US government
Overview Attrition Churn
Rate Expansion Risks
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Employees leave the company to other
competitors
Outsourcing IT to third party vendor
High churn rate
High employee turnover
Poor service quality, especially in Mexico
Lack of scope in the US market
Create Interdepartmental
Collaboration Environment
Reorganize office space to encourage
communication
Standardize Applications
Increase maintenance, data and server uptime
Renegotiate SLAs with ITCo
Situation
Complication
Answer
Human Capital Technology Strategy
Executive Summary
Divest US Operations
Expand into Brazil
Markets
Enter Mobile Payments Market
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Q&A
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Copyright © 2012 Deloitte Development LLC. All rights reserved.
Caculating American Market Revenue Industry Average $45 Churn Rate per quarter 3%Churn Rate per month 1%Total Customers 5,000,000Total Lost Customers in month 50000Total Lost Customers in an year 600000Total Lost Revenue $27,000,000
Calculating Loss of Revenue due to Churn Rate
Appendix
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Brazil Markey Entry Financials
Costs in millions
Spectrum $300.00
Rent $50.00
Wages $50.00
licensing $20.00
Advertising $50.00
Total $470.00
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Mexico Mobile Banking Financials
Costs in millions
Software and Server $5
Personnel $3
Advertising $2
Total $10
Revenue in millions
Bank Rev/customer $100
Telecom Rev/Customer $5
% of subscribers for MB 20%
# subscribers for MB 16
Telecom Rev from MB $90