Despite the efforts that have already been made, we still see substantial opportunity for WC improvement for most operators across the industry.
Today, the global telecommunications service industry finds itself in a delicate position between two imperatives. On the one hand, it needs to respond to rapid technological developments and growing customer needs. On the other, it must fend off pressures from the current economic uncertainty and the Eurozone crisis.
Against this challenging background, many operators have continued to focus on working capital (WC) management as a way to improve cash and reduce costs, enhance customer service, boost network differentiation and fund new investment. More attention has been paid to operational and structural changes in underlying processes and systems, rather than to short-term tactical actions.
Despite the efforts that have already been made, notably in Europe and North America, we still see substantial opportunity for WC improvement for most operators across the industry.
Cash on the line 2012 is the latest in our series of working capital management reports.
Take a closer look at the telecom industry results.
- Among telecom operators in Europe and North America, 2011 results for WC performance show continued improvement relative to 2010. By contrast, operators in other regions reported a relatively poor WC showing.
- European operators displayed significant resilience in WC performance in the face of challenging economic and credit conditions, particularly in certain countries. Overall two-thirds reported better net trade WC results.
- While there was an overall WC improvement in North America, only two operators out of six showed better results in net trade WC, suggesting much stronger performance among large companies.
- In other regions, last year’s poor WC results were primarily due to further weakness in payables performance, fueled by lower levels of capital expenditure.
- Operators in other regions still carry the lowest level of WC in relation to sales, reflecting the importance of revenues from mobile services, and the high proportion of prepaid subscribers. Capital expenditure requirements also remain large. By comparison, North American operators exhibit the highest WC to sales ratio, with a much wider gap between receivables and payables cycles than their European counterparts.
- Within each region, WC performance still varies widely between operators. While this may be partly explained by variations in business models and payment practices, the degree of disparity in performance between companies indicates fundamental differences in management focus on cash and process efficiency.