Operators worldwide leaking $40bn annually in revenue says KPMG

Research from KPMG suggests that telecoms operators across the world collectively leak $40bn in revenue each year.

The accountancy firm surveyed 74 fixed and mobile operators for its Global Revenue Assurance Survey. More than half of the respondents (54 per cent) judged leakage to be more than one per cent of total revenues, while 15 per cent reported that it exceeded three per cent of gross income. Some operators in developing markets revealed leakage running as high as ten per cent.

“Leakages can occur anywhere across the revenue cycle from sales to network configuration and rating and billing,” KPMG said. “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.”

The problem is exacerbated, according to respondents to KPMG’s survey, by a lack of reliable data on leakages. Operator revenue assurance units reported problems with identifying leakage, with some 40 per cent of respondents estimating that more than half of all leakages are going unidentified. Again the situation was worst in developing markets where some operators suggested that they were successfully identifying less than ten per cent of revenue leakage.

These revelations, KPMG said, mean that annual loss estimate of $40bn could be some way shy of the actual figure. And recovery of lost revenue is just as problematic as the leakages themselves. Some 60 per cent of respondents estimated that recovery rates are less than 50 per cent.

“A common perception across the industry is that developing markets face higher revenue leakage than developed markets due to rapid growth and technological changes,” said Sean Collins, KPMG’s Global Chair of Communications & Media. “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.”

The areas of carrier businesses most vulnerable to leakage included prepaid accounts and roaming. With prepaid services requiring reliable real-time billing there are more opportunities for loss and problems with recovery. With roaming, the principal problem is the necessary interaction with other carriers for the exchange of call data.

Of the carriers surveyed, 60 per cent conceded that they lacked the skill sets to make revenue assurance properly effective. Clare Patterson, performance and technology adviser at KPMG Europe said: “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 systems have been highlighted by survey respondents as the most vulnerable to revenue leakage, so the development of those skills should be a priority.”

One comment

  1. Avatar Eddy 08/04/2010 @ 9:01 am

    With per-second billing requiring faster processing coupled with extremely poor call completion rates on account of overloaded networks or ageing infrastructure, this comes as no surprise. Cross over to data call rating and the entire revenue assurance strategy becomes a total balls-up.

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