EMMAs

The Analytic Opportunity

David Murphy

Tajinder Jagdev, Head of the Communications, Media and Entertainment Practice at SAS UK, argues that by identifying and understanding detailed usage patterns, operators can produce healthy roaming margins, despite EU legislation

SAS Tajinder Jagdev On 1 July 2009, EU legislation came into force to lower roaming charges for mobile phones. The new ruling means that, for the first time, operators will have to cap prices on calls, texts and Internet usage across Europe. The maximum charge for a text message now stands at 11 Euro cents (0.09), 43 Euro cents a minute for a call, and 1 for transferring 1MB of data. Two months ahead of this legislation, however, Vodafone announced that it would abolish roaming charges across 35 European countries during the summer period. This means that people travelling abroad until the end of August could make and receive calls at the same cost as they would back home and without the 75p connection charge.

Healthy margins
Despite dropping the connection charges and standardising costs which are now as much as 60% lower in some cases - phone operators like Vodafone can still produce healthy margins in countries where they have roaming agreements, or an established presence.
Around 6 million Vodafone handsets left the UK last summer, but because of expensive connection and call charges, each of those handsets only made around two calls while abroad, resulting in a low total charge of around 1.50 - 2.00. In the majority of cases, this is significantly less than the customer would have spent using their mobile at home. By introducing more appealing call charges, network operators can encourage customers to take their phones abroad and use them just as they would at home, thus potentially boosting call rates and positively impacting their bottom line. While it is clear that any increased usage abroad will drive up revenues, the real question is at what cost? 
The historic margins around roaming services have resulted in the approximate settling of inter-carrier revenues between operators, where the details, specifically financial charges, are rarely analysed. With call charges now lower, and margins under more pressure, how can operators be sure that the charges other carriers are claiming from them are in fact accurate especially in a world where the complexity of services offered is forever increasing? Suddenly the analysis and understanding of this detail could well be worth millions of pounds of extra revenue.

Understanding usage patterns

Business analytics tools can be used by the network operator to delve into this vast amount of data to create a Profit and Loss account for each subscriber, and provide the understanding needed to seek out better margins. Ultimately, any operator will require accurate information to validate current charges or prove inaccuracies, so that any issues can be brought to mediation, or to the attention of regulators, and financial settlements agreed.
Our customers have already benefited from using Business analytics to settle disputes around the costs of leased lines and circuits in the network. One customer enjoyed a 12 million saving on its quarterly invoice from one carrier.
By taking its customers usage patterns into consideration, Vodafone has, for the first time, turned the old, unpopular model on its head and abolished all connection charges. Gone are the days of coming home from a holiday abroad to a huge phone bill. This is great for holiday-makers, who are now more likely to text, call and use the Internet during a two-week holiday in Spain as they would if they were at home ultimately resulting in increased revenue for operators. The impact on the overall margin for this traffic, however, remains to be seen. What we can be confident of, is that the use of Business Analytics can help operators delve into the detail and deliver the assurance that any claim from carriers for roaming revenue is exactly what it should be. 

Predictive analysis
Since the promotion was launched at the beginning of June, Vodafone has announced that around 2.5 million people have so far taken advantage of its Passport offering. For the first time, holiday-makers have been able to make calls at exactly the same price as if they were at home, while many Pay Monthly users have benefitted from using their inclusive minutes for no extra charge.
As the holiday season comes to an end, however, where will mobile operators go from here? Operators will soon have the first set of data since the introduction of lowered roaming charges, while Vodafone will be looking at the results of its charge-free summer promotion. By using business analytics tools, these operators, for the first time, will be able to mine this data to identify challenges to be resolved, and highlight offerings and techniques that resonate with customers. Even more importantly, they can use this data to predict revenue generation from tailoring their services and building them into future promotions, such as seasonal and demographic-specific offerings, and even year-round services. This knowledge is key to forecasting customers demands and revenue streams. The customer benefits, and so does the bottom line.

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