As a recreational athlete, I\u2019m by default a numbers guy.\u00a0 Being a wee bit past my prime competitive years, those numbers don\u2019t look quite as good as they used to.\u00a0 For example, I know that my rate of decline in a 10K running race is approximately 4 seconds slower per klick per year.\u00a0 This motivates me to become more efficient.\u00a0 With my training.\u00a0 With my nutrition.\u00a0 With my body mechanics.\u00a0 I want to get as much from my aging athlete\u2019s body as I can!<\/p>\n
You\u2019ve probably guessed where I\u2019m going with this.\u00a0 Operators universally strive to \u201csweat\u201d as much from their networks as possible.\u00a0 Consider a key metric found in many operator financial statements: Capex-to-Sales ratio.\u00a0 \u00a0It\u2019s an indicator of how efficient an operator is at translating network investments (approximately 80% of overall Capex) into revenue.\u00a0 \u00a0From my reviews of operator financials, I typically see this number in the 13-20% range, with a mean of ~15%.\u00a0 Compare this to Retail (4%), Transportation (8%) and Pharma (6%).\u00a0 \u00a0The Communications sector leads the pack.<\/p>\n
Sure, we all know that Telecom is Capex-intensive.\u00a0 This just puts a number on it.\u00a0\u00a0 But there are further pressures on operator balance sheets.\u00a0 Most operators cannot maintain the required investments in their networks with cash from operations alone (as evidenced by declining EBITDA margins), so they pile on debt.\u00a0 This becomes a vicious cycle.\u00a0 Proceeds from bond sales yield more working capital,\u00a0 but debt service requires free cash.\u00a0\u00a0 What\u2019s the best way for an operator to increase free cash flow in the business?\u00a0 Reduce Capex!\u00a0 And around and around we go.<\/p>\n
Hence it becomes imperative for operators to seek innovative ways to address seemingly contradictory goals\u00a0 – reducing their Capex burden, while supporting increased bandwidth demands and new product\/service rollouts.\u00a0 \u00a0For this I advocate turning to the numbers.\u00a0 For example, do you have a metrics-driven understanding of:<\/p>\n