A tough hole to plug

Telecom operators worldwide face growing revenue leakage and need to put more effort in reducing their losses, according a survey conducted by Analysys and sponsored by Subex Azure, a specialist in revenue maximization solutions.

The survey found that the average revenue leakage across global telecom operators rose to just over 12% of turnover ($176 billion) this year, compared to 11.6% last year. The decline comes despite the fact that operators are now putting greater emphasis on revenue assurance, which has now become much more of a board-level issue.

The report is based on the response from over 100 telecom operators around the world, including fixed-line operators and mobile carriers with a subscriber base ranging between under 10,000 to over five million.

While operators in the Middle East and Africa continue to struggle in the containment of revenue leakage, losses in Asia Pacific and North America continue to remain high. Specifically in Asia, average revenue leakage has increased from 11.9% last year to 13.8% this year, back to a similar level in 2004.

Danny Dicks, principal analyst with Analysys, says one of the key factors contributing to the increase in Asia is invoicing systems errors due to changes and upgrades to billing systems.
Another major cause is fraud, which is again the single largest area of revenue leakage, rising slightly to 2.9% (both globally and in Asia Pacific) of turnover, according to Subex Azure CMO Nick Milner.

'Fraud is now part of life,' Milner says, adding that Asian operators suffered higher losses due to external fraud than their counterparts in the rest of the world. In Asia, losses caused by external fraud accounts for 2% of turnover, compared to the global average of 1.2%.

The report also found that external fraud among mobile operators is much higher than it is among fixed-line operators, given cellcos' complex product portfolio and mutli-level pricing structure.

With more complexities to deal with, mobile operators in general are exposed to greater potential for revenue losses than their fixed-line counterparts, Milner says.

Looking ahead to next year, 23% of the respondents expect an increase in revenue loss from external fraud. The figure is much higher in the Middle East and Africa where 64% of respondents expected increased external fraud in the next 12 months.

Apart from fraud, the survey reveals that there are also increases in revenue leakage due to credit management, incorrect service usage data and interconnect/partner payment errors.

In-house approach dominates
Another discouraging sign is that the use of centralized revenue assurance (RA) teams within operators is falling, despite evidence they are effective in identifying causes of loss. However, it is not clear whether these teams are actually effective at stemming losses, Dick points out.

'Our research suggests that there is some movement toward centralized teams in some areas, and there are some areas where RA teams are not a norm,' Dicks explains. 'If we look at what have happened globally over the years, it has gone up and down.'

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