Network Operator Financial Operation Model
A leading operator in Canada is considering acquiring spectrum for deployment of broadband wireless services using WiMAX technology. The question was whether there was a business case for the service and in which areas it made sense to roll out that service. Also, what type of service quality would have to be offered and what are the future cash flow projections.
Problem & Approach
To answer the questions posed by our client, we developed a complete financial model for wireless carrier operations. We based the model on detailed technical parameters for coverage and capacity capabilities of WiMAX that include a link budget, appropriate path loss models and reliable system capacity metrics. This was critical in enhancing the confidence in the output results. We used detailed market data on subscriber density and information from the operator on the desired level of service and the business model related to consumer devices (lease, sell, subsidize). We developed a capex and opex model that includes all elements of the network (radio access network and core network), and functions (engineering, operations, marketing, administrative, etc.). We made projections based on market analytics, which can be adapted on regional basis. A full 5 and 7 year business model was derived that included financial statements.
The results were presented to the client together with sensitivity and scenario analysis that highlighted the dependencies and requirements fora successful outcome of the project. The model indicated that the business case was challenging in urban areas, while in rural areas, the subscriber density was too low (for it to)to operate successfully.Only in some areas where density was high enough and competitive services were lacking did the investment provide a positive ROI.