Telecoms Industry losing billions each year through revenue leakage according to KPMG survey

April 3, 2010 - PRLog -- Revenue leakage is costing the global Telecommunications Industry an estimated US$40 billion each year according to KPMG’s annual Global Revenue Assurance Survey.

Over half (54%) of telecoms operators surveyed put revenue leakage at more than 1percent of total revenues. Fifteen percent of operators reported leakages greater than 3 percent, including some in developing markets placing the leakage as high as 10 percent.

The survey of 74 operators in 46 countries across the Americas, Europe, Africa, the Middle East and the Asia Pacific regions, also found that a lack of available data was adding to the problem by making it harder for the Revenue Assurance functions of telecoms operators to identify leakages.

About 40 percent estimated that less than half of total leakage was identified. In developing markets large numbers of respondents indicated that less than 10 percent of leakages were identified. As a result overall losses to the industry worldwide may be significantly higher than estimated.

Tareq Al Sadhan, KPMG Saudi Arabia’s Managing Partner and Chief Operating Officer, said, “A common perception across the industry is that developing markets face higher revenue leakage than developed markets due to rapid growth and technological changes. The survey supported this view, but also highlighted that data availability poses challenges for operators across all regions. In fraud-related leakages data unavailability was of even greater concern with 37 percent of respondents unable to obtain the required information.”

Recovery of leakages remains a problem in all regions. About 60 percent of operators surveyed estimated that less than half of leakages identified were recovered.

Khalid Yasin, Head of Internal Audit Advisory in KPMG Saudi Arabia, said, “For the majority of operators, recovery of leakages ranged from 2.5 to 37.5 percent of the total estimated revenue leakage, indicating that a large proportion of revenue leakage remains unrecovered.”

Leakages can occur anywhere across the revenue cycle from sales to network configuration and rating and billing. A typical leakage might arise from incorrect billing or chargeable call records not being passed on to the billing system for rating and charging, or from international destinations being configured as local destinations. But operators also lose money through revenue exposure, failure to enhance revenues and from failure to identify and implement cost savings.

The survey found that significant configuration changes in any of the network elements was rated as the most vulnerable to revenue leakage, followed by new product development and tariff configuration.

In respect of the revenue streams seen as the most susceptible to leakage, more than 45 percent of respondents ranked ‘prepaid accounts’ as the most vulnerable. In developing markets, a majority of respondents ranked ‘roaming’ and ‘value added services’ as the second most vulnerable, while in Europe and America ‘postpaid’ was ranked second. The survey noted that the largest revenue stream for most operators was also seen as the most vulnerable.

The majority of operators (60%) acknowledge that they are hampered in their efforts to reduce revenue leakage because their Revenue Assurance operations lack the necessary skills to be effective. Most respondents felt technical skills – knowledge of network elements and other systems – were the most significant missing skill set. Second to technical skills was a lack of audit and investigative skills.

Khalid Yasin added, “It is critical for revenue assurance personnel to understand the various aspects of the revenue cycle – technical, commercial and financial. Technical areas such as networks or rating and billing have been highlighted by survey respondents as the most vulnerable to revenue leakage, so the development of those skills should be a priority.”

The survey concluded that developing more effective automated Revenue Assurance tools, spreading awareness of the Revenue Assurance function throughout their organisations and obtaining accurate and timely information were the key Revenue Assurance challenges facing telecoms operators.
 
There is some optimism about the future, however. While 90 percent of the heads of Revenue Assurance operations believe that future developments in the industry will only add to revenue leakage, more than half of them were confident that their Revenue Assurance function would be able to identify the increased revenue leakage.

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KPMG Al Fozan & Al Sadhan is KPMG’s member firm in the Kingdom of Saudi Arabia and part of the Middle East and South Asia region. KPMG has operated in Saudi Arabia since 1992, having offices in Riyadh, Jeddah and Al Khobar.