A new report from Ericsson ConsumerLab shows that capital investment to improve network quality and performance translates into better financial returns for operators, not only from cost savings but also from increased revenue.

Behind the report is a study commissioned by Ericsson that explored the relationship between capital investments in mobile telecom networks and the technical, commercial and financial performance of operators. Extensive statistical analysis was performed on three years of quarterly data from three different markets – Brazil, Mexico and the US.

The study found that a 10% increase in capital expenditure for a Brazilian operator resulted in increased market share, a significant boost to average revenue per user and reduced churn. This enhanced commercial performance should mean a 5.5% increase in service revenues, 6.4 percentage point improvement in EBITDA, and a 6.7% increase in free cash flow from operations.

Previous reports from Ericsson ConsumerLab has shown that network performance is key to ensuring subscriber loyalty and low churn, so this shouldn’t really be shocking news. This particular study is done with mobile telecom networks, but the financial incentive to invest in improving network quality and performance is just as valid for IP network operators and Internet service providers.

When investing in improving network quality, it is essential to first make sure that you have a tool in place that can accurately show the performance of the network from an end-user perspective and clearly identify whether the reason for flaws is within your responsibility or resides in other parts in the delivery chain.

About the report
Extensive statistical analysis, across a large set of metrics, on three years of quarterly data from three differnt markets, Brazil, Mexico and the US, was performed. A simulation model was constructed to estimate the effects of increased capital expenditure on mobile operators’ free cash flows, allowing operators to assess the commercial and financial gains attributable to the increased investments.

All ConsumerLab reports can be found at www.ericsson.com/consumerlab

Link to report: www.ericsson.com/res/docs/2014/value-performance-report-screen.pdf