OPEX reduction in Mobile Networks

In today's economic environment most if not all companies search for ways to increase revenue and decrease cost. In these times where spending is not at its highest decrease in cost is the most desirable.

In mobile networks reduction in OPEX is the main aim of every financial controller. Achieving this would mean that the company can have better profit margins and return of investment. There are several ways of reducing OPEX ranging from the easy excuse of reducing staff to the most complex solution of consolidating operations and maintenance. Every strategy to reduce OPEX has its pros and cons, however there a few that are very effective with no downside as follows:
- Site lease pre-payments
- Effective asset monitoring
- Multi-dimensional planning

Site Lease pre-payments
Site leases are the second highest cost for any network operator next to payroll. Most companies approach OPEX reduction by reducing payroll cost thus reducing the number of staff but this also reduces the company’s capabilities. Reducing site leases is the way forward especially if the reduction is substantial. However it is a fact that site leases don't reduce over time, they actually increase based on factors such as inflation, raising value of property, etc. The challenge is how do you reduce this cost?

The answer is simpler than you think it’s pre-payment of site leases. This new strategy is being pursued by equity firms such as RFS Capital of which received the only carrier sponsored site lease pre-payment today with 2 of the world's largest mobile operator. Site lease pre-payment can reduce the cost of leasing sites from 20% to 40% considering industry standard site lease escalators. OPEX reduction is achieved by paying the future lease today which is basically paying the net present value of a future rent. In doing so the rent escalators are removed thus instant savings and the monthly rent are lowered as well.

Considering an average savings of 25% over all sites, take into account an operator with 10,000 sites of enters a lease pre-payment term. As an example the average site lease is 10,000€ per year. Now with 25% savings that amount to an OPEX savings of 25M€ year in and year out. Taking into account 25 year lifecycle of a cell site, the total savings is 625M€. That's a lot of money and with no cost to the operator; site lease pre-payment is the future of OPEX reduction.


Effective asset monitoring
Cell site is one of the most expensive physical assets of a mobile operator considering the CAPEX that goes in every site. In an average case 1 cell site have a CAPEX of around 50,000€. Effective asset monitoring actually starts during the building and installation phase. In a lot of cases around 5% of sites needs re-work and another 5% would need special maintenance due to poor implementation. If an operator have an effective asset monitoring platform such as ADaM (Amanzi Data Management) then it is possible to achieve around 10% savings in OPEX.

Considering a yearly roll-out of 1000 sites, the OPEX savings achieved is around 5M€ at the cost of the asset monitoring platform used. There are good open source platforms that can deliver this kind of savings which cost almost nothing. An example of such application can be found in http://adam.amanzitel.com this application shows what can be monitored.

Multi-dimensional planning
Good planning is always essential to the success of any operations. In a well planned mobile network the capacity is properly dimensioned to meet the needs of its users. Additionally the changing dynamics of a mobile network is kept in check by optimisation, this in some way makes network planning an easier task. Optimisation is of course a high OPEX cost but with good returns in terms of providing a very high quality of service thus lowering churn rate. It is more a strategy for revenue assurance than OPEX reduction, how big is its effect to the overall picture? Consider a network with 5 million subscribers having a monthly ARPU 50€ of which has a churn rate of 5%, now with an optimised network the churn rate can be reduced to 2.5%thus ensuring an annual revenue of 75 million Euros.

Furthermore an effective network planning can save 10% of sites in a roll-out. Although this savings is always offset by the actual requirements in capacity and rate of how the network grows. Consider that on a 1000 site roll-out the savings is 100 sites of which an average cost for a site is 100,000€ then that's a savings of 10million Euros.

The best multi-dimensional planning application should be able to consider both revenue assurance and roll-out savings, thus increasing its effectiveness.