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