In an investment-driven industry such as telecommunications, optimizing investment decisions has always represented a key competitive advantage for operators. However, in a market characterized by stagnating growth rates and increasing competition, where many telecommunication companies are facing flat or even decreasing revenues, keeping up with the latest technologies in order to ensure differentiation and meet the increasing demands of interactive services becomes binding. Operators are therefore facing new challenges in making investment decisions: how to identify the right investment, at the right time and for the most commercially attractive geographical areas. Arthur D. Little, through its long-standing project experience in the industry, has developed a multi-criteria CAPEX prioritization methodology, based on three sets of KPIs: business, technical and customer experience. By shifting from the traditional investment decision model to the suggested holistic approach, operators will be able to answer new and strategic questions such as “What is the impact of incremental investment on customer satisfaction and, consequently, the churn rate?” and “What is the correlation between network performance and ARPU?”

Urgency for a new investment allocation model

Due to stagnating core market growth and increasing competition, many telecommunication companies are facing flat or even decreasing revenues. In this increasingly difficult landscape, telcos must rethink their investment strategies for making smarter and value-creating decisions. One of the crucial battles between competitors relies on keeping up with the latest technologies in order to ensure differentiation and meet the increasing demand for interactive services and applications, while simultaneously providing a consistent and reliable service experience to customers. This, however, represents a challenge, since deploying, maintaining and upgrading a nationwide network infrastructure is a considerable financial and operational effort. Suffice it to say that the upcoming 5G network standard will increase the run for CAPEX by approximately EUR 500 bn by 2025 in Europe.

It is clear that the key to success for telcos is now, more than ever, an effective and optimized investment allocation strategy. Moreover, the upcoming wave of capital-intensive fiber roll-out is making investment decisions even harder: operators will have to base their investment decisions on very granular (i.e., street-by-street) and complex ROI assessments

Luckily, the possibilities of improving investment decisions through advanced analytics methods has vastly increased. As of today, not exploiting this kind of data may represent not only a missed opportunity, but also a costly mistake. Unfortunately, we have found out that many operators still base their network deployment investment prioritization on few drivers – mostly either technical performance or customer complaints.

Conversely, a successful investment strategy requires a holistic and granular perspective. Arthur D. Little constantly uses this approach and, while reassessing the whole network-investment prioritization process, introduces new information layers for steering and ex-post measuring of CAPEX effectiveness.