Cost Reduction for Wireless Network Operators

Today I have had several discussions on various ways to reduce the cost in wireless network operators. But why reduce the cost? The answer is simple in most mature markets (countries where subscription is close to 80% of the eligible population) and saturated markets the profit margins are decreasing since the revenue are starting to flat line. Like in any business wireless network operators would like to maximize their profits and one way to do that is to reduce cost.

Why cost reduction instead of increase in revenue? Again the answer is simple cost reduction is something that can be controlled while increase in revenue is pretty much tied to the subscribers and marketing is not without cost. Now lookign at the cost what are the best ways to reduce that? You cannot simply fire your staff and reduce your head counts, which in a lot of cases is the simplest solution.

In today's competitive world there are various trends in cost reduction for wireless network operators. One is network infrastructure sharing which is a common trend in UK, Sweden and other European countries. This is a necessity since the number of potential antenna or site location is limited. Another is outsourcing, a very common strategy within the Vodafone group where the operations is outsources to a partner company in most cases an infrastructure vendor. Another is performance optimisation that can reduce the cost of operations and maintenance. Another possibility which is least explored is cost reduction in infrastructure leases. It is least explored since most infrastructure lease contracts put in place are long-term contracts with little possibility of re-negotiations.

The question is which strategy is best to implement? The simple answer lies in the operators’ strategy and how it sees its core business. Operators who see their core business as selling subscriptions would typically outsource their operations. Operators who see their technical operations as a core business but do not want to be bothered by infrastructure usually go for network sharing. There are operators that do not see outsourcing or sharing as the way forwards since they see this assets are part of their core business and those mostly focus on extensive performance optimisation activities. Network optimisation aims to reduce cost while at the same time increase usage and revenue.

Where does the financial solution belong to such as reduction on the cost of leases? Actually it applies to all much like performance optimisation. Even though entire operations are outsourced or infrastructures are shared, the physical site locations (if not the infrastructure itself) is leased from an owner. So how would you reduce such cost without having to go to the painful process of re-negotiations?