Asset Value Recovery
Tuesday, August 23, 2011
Sold to the Highest Bidder!
Among the 100 or so telecom executives I’ve spoken with over the past few months, there appears to be little appetite for retaining de-installed network assets longer than required – and justifiably so. Decommissioned material sitting idle in warehouses consumes precious space and resources, and depreciates in value with each passing day.
For many, the fastest remedy for off-setting the logistical burden and rapid decline in value of excess equipment is to simply sell entire lots of equipment to the highest bidder. Rarely – if ever – does this approach yield true market value nor does it lend itself to the potential for reuse of select assets within network operations.
In an industry as dynamic and competitive as telecom, go-forward asset disposition and investment recovery strategies must aggressively push aside convenience in favor of approaches better suited to achieving service delivery objectives and cost reduction. While many carriers are pre-disposed to selling excess material for what amounts to pennies on the pound, reuse strategies such as the one employed by Telenor Norway, are proven to increase financial benefit and cash returns by 2-3X. And in the process, drive the sort of operational efficiency and cost reductions these executives truly seek.
Posted by Billy Balfour •
Category:
Asset Value Recovery •
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Wednesday, July 07, 2010
The Cycle Continues
France Telecom’s new CEO, Stephane Richard, was out in front of the press earlier this week detailing the carrier’s five-year strategic growth plan. It’s a big, bold and ambitious plan that by 2015 could see Orange the service provider of choice for 300 million people. By my calculation, that amounts to roughly 22% of the world’s population. How does France Telecom plan to go from 192 million to 300 million customers in five years? Upgrade existing networks and capitalize on the explosive growth in markets such as the Middle East and Africa. Making the most of new opportunities in emerging markets will almost certainly involve a few strategic acquisitions, which are en vogue across the industry (right now, the industry’s on pace to have its busiest year of M&A since 2005 when transactions topped $408 billion).
Any time there’s an acquisition in this industry, the price tag, expected revenue and customer growth will almost certainly grab all of the headlines. What you won’t hear much about though is how these companies plan to manage all of their newly acquired network assets for maximum profit. A seemingly minor detail to a large transaction? That’s a dangerous omission for firms looking to assuage investors of a multi-billion dollar deal. When you get right down to it, the financial models created to support an acquisition are predicated on metrics such as operational efficiency, integration of network infrastructure, and service delivery levels. If a company can’t answer fundamental questions about the location, condition, or value of those millions of network assets it just acquired, discharging those models will become daunting at best.
Tuesday, June 29, 2010
Capex and Wall Street
From my perspective, this excerpt from a recent (June 16) Reuters article offers a fascinating glimpse into Wall Street’s mindset regarding the impact of current network investments on long-term market cap:
"Investors could be surprised by capex plans over the coming years and for a sector still generally mistrusted to allocate capital optimally, this is likely to lead to volatility in the shares," said James Gautrey, telecommunications analyst at Schroders. "Until I see more concrete evidence that the companies will generate a decent return from their fiber/mobile investments, there are better opportunities elsewhere.”
We’ve all heard about the explosion of mobile data traffic and subsequent requirement for network expansion (Apple sold another 1.7 million iPhone’s over the weekend). Which is precisely why Wall Street’s radar is so attuned to capex ratios. Challenging Wall Street perceptions such as Mr. Gautrey’s will require carriers to find new and better ways to optimize equipment planning, sourcing and disposition, and extend the overall value of their network investments. At the end of the day, far too many assets are still left in the dust before they’ve even come close to reaching their full revenue potential.
