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Telecoms industry leaking £2.3bn revenue a year through give aways, poor billing and third-party mismanagement   

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The globally telecoms industry is failing to collect 7.09% of revenues it is owed, creating a leaking £2.3bn blackhole in the sector’s finances, according to a new study.

Data from consultancy Sagacity shows telecoms businesses are leaking billions of pounds in revenue and don’t know how to prevent it from happening – putting jobs at risk. The report – The Missing Billions: The Impact of Revenue Leakage on UK Business – offers analysis on the findings of a new independent survey of telecoms professionals with responsibility for profit and loss1 working in the telecoms industry.

The study finds that more than two thirds (67%) of telcos are aware revenue leakage is a major problem, but don’t know how to prevent it – with 56% likening revenue leakage to ‘death by a thousand cuts’.

More than half of them (52%) say revenue leakage will lead to people losing their jobs, with 69% saying revenue leakage is hampering growth and profitability. Overall, 69% say poor quality data is a major source of revenue leakage, with 64% saying that a lack of quality data prevents them from collecting earned income. 71% say they would be more profitable or have more revenue if they had better quality data.

However, almost half of the revenue leaked (42%) can be attributed to avoidable issues, such as poor reconciliation, lack of oversight, governance and controls, human error, and inaccurate data.

“A dedicated and mature Revenue Assurance function should limit telco revenue leakage to 0.5%; they have a lot of ground to make up if they want to reduce leakage down to this amount,” says Hakim Akayour, Head of Revenue Assurance at Sagacity. “While most telcos are aware that they have a revenue leakage problem, the billions of pounds being leaked may come as a surprise. However, it’s not as simple as plugging one hole – there are lots of small leaks adding up to create a bigger problem.”

What is leaking?

When looking at the causes of revenue leakage, there are several areas that almost all telecoms businesses slip up on, such as:

  • Giveaways and discounts: Almost all (96%) of telcos fail to revoke ‘friends and family’ discounts when an employee leaves. Meanwhile 92% incorrectly give away chargeable equipment, extend free trials or services, or apply large volume/value discounts, and 92% apply an incorrect end date, or no end date at all, to discounts.
  • Incorrect billing and poor reconciliation: Almost three quarters (72%) of telcos don’t even send a bill to some customers, due to poor data reconciliation (i.e. inability to match customers with the services they receive). Most (91%) mistakenly give customers services like Disney+, Apple Music, Netflix and phone insurance without charging them for it. Overall, more than half (56%) say poor data reconciliation holds them back from collecting revenue.
  • Third party mismanagement: 69% say third parties are to blame for revenue leakage, with three quarters (75%) saying brokers cost more money than they bring in. The biggest problems telecoms leaders reported include brokers offering customers discounts and offers they are not entitled to (76%), paying them commission for customers that leave shortly afterwards (64%) and passing leads with missing or incorrect data, preventing them from converting and incurring additional customer service costs (73%).

“Telcos need to address poor processes and a lack of oversight as a matter of urgency,” adds Harry Dougall, CFO at Sagacity. “Getting oversight of everything is going can be easier said than done. We worked with a telco that found disparate systems made it difficult to reconcile the value of discounts against services taken by their customers. We created a single customer view, identifying 20,000 customers receiving discounts they were not eligible for, allowing them to make a £1.2 million annual saving.”

“It can be hard to know where to start, but there are solid steps suppliers can take,” Dougall says. “The first step towards regaining control is pinpointing processes that cause leakage the most often. Tasks involving manual intervention, complex hand-offs, high customer volumes and time pressures, are absolute breeding grounds for problems. Data quality must be absolutely paramount – ‘garbage in, garbage out’, as they say. Telcos need to make sure that data is being captured correctly, then regularly cleansed and updated. Getting a handle on processes and driving data quality will stem the tide of revenue leakage.”

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