Telecom operators around the world lose about 12 percent of their revenue on average to factors ranging from internal and external fraud to bundling and the billing complications that providing multiple services brings. That figure reflects a slight increase from 11.6 percent in 2005, according to a revenue leakage survey of more than 100 wireless operators conducted by U.K.-based firm Analysys.
The study was commissioned by Subex Azure Ltd., a firm specializing in revenue assurance.
North American operators saw their total losses decline from 15.5 percent last year to around 11 percent in 2006, Analysys found. While operator trimmed their revenue losses in most areas, losses increased in three areas: fraud by other operators (using traffic routing or other ploys), external and internal fraud.
Danny Dicks, senior analyst for Analysys, noted that operators in the survey tended to underestimate their own losses, but that the firm’s numbers were “pretty much in line with other analysts who’ve looked at these issues.”
Most operators surveyed said that revenue losses of 1 percent or less would be acceptable, although a few indicated that losses of more than 4 percent of revenue would be tolerable. Large operators tended to be less tolerant of loss, and also to have fewer losses than smaller operators.
Regional differences around the world also played a large part in the results, with revenue losses in the Middle East, Africa and Asia Pacific particularly high.
Africa, which is building new networks, is experiencing some trouble related to deregulation. “They’ve just got endemic problems of both corruption and a lot of new networks,” said Dicks.
North American companies tended to have generally lower losses than other countries except in the area of fraud, where losses in North America tended to be higher. Dicks said that Sarbanes-Oxley financial disclose requirements are probably the reason for that, as the rules forced operators to look more closely at where their money was going.
Some of the many reasons for revenue losses cited by operators included: invoicing system errors, prepaid charging errors, poor systems integration, incomplete or incorrect usage data, credit management and various types of fraud. Analysys also found that when chief financial officers took responsibility for revenue assurance, losses appeared to be more than 4 percent lower than in companies where a chief executive officer or other senior manager was responsible. Companies that sought external help on revenue assurance issues tended to lose less money and also were more likely to have an in-house team of people focused on revenue leakage problems.
Dicks also noted that bundling—which is becoming an increasingly popular way for operators to offer service—brings certain problems of its own and that in general, bundling “represents more opportunities for revenue loss.”
“You introduce new services very quickly, you rush it out,” he said. “It’s not certain that you know that the billing system can actually bill for the services, and if it can’t then the revenue is lost.”
Worries about problems associated with launching new products and applying new prices is the top concern for North American operators for the next 12 months; 30 percent of operators have those concerns. Other potential problems that operators are concerned about include problems with poor processes or procedures, poor systems integration and worries about the accuracy of usage data from the network.
