IIR telecom cost & Profitability interview with Gabor Foldes, Head of Cost Controlling Department at MPVI Mobile (4^th Hungarian state-owned  Mobile Network Operator start-up)

IIR: What approaches do you think will help operators best manage margin squeeze and ensure that all the operators in the market place can achieve an effective price-cost margin?

Gabor Foldes: It depends on whether incumbent market players are able to maintain status quo, or a new entrant with other interests is willing to reshuffle market shares with a different price structure. Nevertheless rearrangement of the market situation cannot last too long, as all players have to finance their operation from the capital markets under harsh conditions. So overall competition does exist, but eyes are also on the profitability pot metre.

IIR: What can help in the cock pit? How do you promote transparency in costing/profitability relations?

Gabor Foldes: Every telco could leverage on functional-based indirect cost efficiency benchmarks, which might help compare performances: identify strengths and weaknesses in processes  – independently from organisational structures. Functional costing describes better real corporate processes to serve customer needs, and as next step offers a good starting point for analysis of profit contribution of revenue generating units (products, customers etc…)

IIR: Who can benefit? How companies can leverage different market stages: incumbent operators or newcomers?

Gabor Foldes: In order to close efficiency gaps, under or over performance, and point out the functions where cost cuts are inevitable or the other way around, spend more to better support business development (low spending is a value only if not limiting business development).

IIR: Speaking about cost & profitability: what is the current profitability perspective for the most promising segment, mobile broadband?

Gabor Foldes: It is still a though issue. Based on several attempts introducing flat rates for mobile broadband services proved to be rather doubtful from a profitability view. I see two dangerous approaches: sweep the issue under the carpet or overestimate risks. Appropriate modeling of the cost-volume curve development using network building block concept & routing is key.