Business Planning and Modeling. Business Planning and Modeling

Transcription

1 ITU/ BDT «Training and Trials on Network Planning Tools for Evolving Network Architectures» June Moscow, Russian Federation Oscar González Soto ITU Consultant Expert Strategic Planning and Assessment June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 1 Content Role of Business Planning today Basic business concepts Telecom business modeling June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 2

2 Role of Business Planning Forecast solutions, costs and revenues Evaluate future Cashflows, NPV, IRR, ROI, etc. Perform What-if analysis for optional alternatives on Volume of customers, customer mixes and services domains Perform benchmarking with best in class operators Decision making on strategy and actions in competition based on quantified evaluations Recommend alternatives and actions to ensure success June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 3 Definition of business plan A Business Plan presents the calculation of the financial indicators that enable the managers to evaluate the financial performances of an entreprise in order to take decisions. A Business Plan summarises the results of the planning process: the objectives to reach ( subscribers demand, sales) the description of all activities requested by the project; the future revenues expected from the project; the planned expenses (investment and operations); the accounting statements and the financial indicators characterising the profitability of the project. June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 4

3 Types of business plans Strategic Business Plan for evaluating a strategy: aid for making internal decisions for the whole company (strategic guidelines at the national level, all markets) Tactical Business Plans for specific projects : aid for making internal decisions for a particular area, or a market segment: IN, mobiles, IP Short term Business Plans for management control : aid for monitoring the implementation of projects preparation and follow-up of budgets, June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 5 Iterative process for evaluation Strategic objectives, strategic guidelines Marketing planning Network planning Operations planning modifications Human resources planning modifications modifications modifications Business Plan Evaluation June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 6

4 Interaction between analysis and business plan Analysis SWOT Pricing Service portfolio Technologies used Action plans Business Plan Costs models Revenues Financial indicators Evaluation Sensitivity studies what parameters to improve, how to adjust models June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 7 Business model structure Demand Tariffs Human Resources Corporate Customers Revenue Ordinary Customers Revenue CAPEX OPEX Evaluation with Ratios and financial indicators : NPV, IRR, pay-back, EVA, ROCE June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 8

5 Services Revenues calculation Customers Services Telephone connection fee rental fee local calls ld calls idd calls Mobiles Leased lines Data Video Added value services Total Revenues June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 9 Expenses calculation Customers Services Network construction operations extension Customer Care provisioning repairing call center Marketing Billing Labour Costs Administrative & general costs CAPEX OPEX June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 10

6 Financial Statement Income Statement: Net income = revenues - expenses Balance Sheet: Company capital = Assets - liabilities Cash flow statement : Cash balance = Inflows - outflows All fundamental financial indicators are carried out with the elements of these 3 statements June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 11 Financial indicators calculation The most useful economical indicators are : - Net present value (NPV) - Internal rate of return (IRR) - Discounted Payback period (DPP) - Net cash flow (NCF) - Discounted cash flow (DCF) - Operating income - Revenue per service/service class June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 12

7 The purposes of the accounting statements Income statement to analyze potential profit is the profit enough? Balance statement to analyze the financial structure how to finance the development enough / too much equity? Enough/ too much debt Cash-Flow statement to make payments at every due date to have the right cash at the right time June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 13 Income statement CAPEX Depreciation Taxes - - OPEX - + Revenues EBITDA Earning before income taxes, depreciation and amortization -- EBIT Earning before interests, and income taxes, Net Income June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 14

8 CAPEX: Capital Expenditures CAPEX contribute to extend the fixed assets, and they are depreciated over an economic life time CAPEX are necessary for extending the business or for improving the range of services provided by the operator. Examples : Purchase of land & buildings, Network construction Purchase of information systems (hardware & software ) June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 15 OPEX= Operations Expenditures OPEX are expenses which don't contribute to extend the fixed assets, and consequently are not subject to depreciation OPEX are necessary for running the company, - Technical operations (switching, transmission, local loop,..) - Commercial operations (marketing and sales) - Administrative operations (support,..) Examples : - Labor costs for operations, - Travelling expenses, periodic administrative costs, - Rental of equipment, rental of cars, rental of buildings - Interconnection fees June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 16

9 Income statement Cost of sales Total revenues (sales) Gross margin Operating expenses Income from operations Other incomes EBITDA Depreciation EBIT Taxes Interests Net income Dividends Retained earnings June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 17 Cash Flow Inflows Revenues, funds Cash balance CASH FLOWS IRR NPV Out flows OPEX CAPEX Working Capital changes Taxes June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 18

10 INFLOWS and OUTFLOWS Customers Shareholders Banks, lenders Sales of services Increase of equity Increase of debt (operating income) (capital increase) (credit, loans) INFLOWS cash flow OUTFLOWS Labour costs Training Network & equipment Technical & administrative expenses Tax Debt repayment with interests Dividends Staff Suppliers Service providers Government Banks, lenders Shareholders June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 19 Rules for Equipment Depreciation Residual Value 100% Delayed depreciation Linear depreciation x% RV at Yn 0 Accelerated depreciation Years Y0 Yn Ym June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 20

11 Cash-Flow and components over time Financial evaluation and cash flow KEuro Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Capex investment Opex Capex extension Capex substitution Residual value Revenues Cash flow evaluation period June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 21 Business domains and trends Illustration case for customer categories and revenues Growing Volume 0.5-1% 3-8% 8% 10-20% 60-70% Large Corporations Small& Medium Enterprise SOHO (1-2 people) High-End Residential L-E Residential > Growing revenues Operator business feasibility as a function of mix of categories Classes Of Customers Revenues/Month (Euro) Customer stratification should be analyzed per country June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 22

12 Importance of Modeling Economy of scale per technology and size Cost per unit u 1 u2 u 1 = a 1 + B / S 1 u 2 = a 2 + B 2 / S Full capacity cost m 1 t 1 m 2 X M1 M 2 t 2 m 1 m 2 X M1 M 2 Equipment size t = a S + B t = a S + B Equipment size Impact by occupancy or fill-in degree June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 23 Importance of Modeling: Deployment Strategies Equipment Deployment:CAPEX C: Balanced between COOP and demand satisfaction B: High risk, CAPEX and OPEX Solution B (Once for all) Solution A (yearly) Solution C (Optimized) Demand forecasts A: High OPEX by installation costs risk to satisfy demand Years Major impact on CAPEX and OPEX June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 24

13 Key Factors in competition: : Business feasibility Feasibility space highly dependent on country size and economic level Revenues per customer/year (ARPU) r 1 $ Preasure by payment capability, churn or regulation constraints Business Feasibility area: r 2 $ Preasure by required NPV and IRR n 1 n 2 Volume of Customers/type Business feasibility area limited by positive NPV and payment willingness June 2007 ITU/BDT Network Planning/ Business Planning - O.G.S. slide 25