Simply Slashing Network CapEx Will Harm Telco Operator Sustainability

SINGAPORE, June 19, 2012 /PRNewswire/ --

Delta Partners, the leading TMT advisory and investment firm released its latest article today titled "CapEx - quo vadis? Managing Network ROIC".

Over the last few years, investors are increasingly shifting their valuation criteria from revenue growth to return on invested capital (ROIC). As a consequence, operators must step up to improve the way they manage their biggest investment item: network CapEx

CapEx levels and trends across regions vary significantly:

• Mature markets have a lower CapEx/Sales ratio than developing markets (Latin America is the only developing region that has managed to bring its CapEx/Sales ratio down to mature market levels)
• There is no homogeneous CapEx/Sales ratio across developing regions

Going forward, Delta Partners predicts mature regions such as North America and Western Europe will remain broadly stable, "around 13 - 14% CapEx efficiency" while emerging regions will decline but remain at a higher level of CapEx/Sales ratio if operators manage to address the CapEx challenge of additional new technologies (3G, LTE etc.) and exponential data traffic growth.

The article discusses six steps telco operators can take to improve network ROIC saying that, "the days that operators could afford to take decisions on CapEx independent of commercial strategies (and vice versa) are over.."

"Operators must be more long term focused when it comes to Network CapEx - thinking about short term cost cutting or traditional blanket approach for network roll-out could be detrimental to telco operators," adds Xavi Anglada, Partner at Delta Partners.

In conclusion, Delta Partners believes that operators must have a clearer focus on one of their most sizeable expenditures - Network CapEx. Blindly cutting back on network CapEx to save costs is short sighted as it could harm the sustainability and competitiveness of operators. However, operators must implement a more rigorous and consistent approach, focused on ROIC, that delivers on the expectations of shareholders and investors whilst maintaining competitive.

To read or download the complete article visit http://www.deltapartnersgroup.com/our_insights/articles

For more about Delta Partners please visit http://www.deltapartnersgroup.com

For further information and media relations please contact: Mia Mutic, Delta Partners, +971(4)369-2999, mmu@deltapartnersgroup.com