Telecom companies need to fully understand the value drivers that are critical to the telecom arena, a recent survey by PricewaterhouseCoopers of New York has shown. Furthermore, they must develop mea...
September 1, 2002
Telecom companies need to fully understand the value drivers that are critical to the telecom arena, a recent survey by PricewaterhouseCoopers of New York has shown. Furthermore, they must develop meaningful reporting metrics that can be consistently conveyed to the marketplace.
Entitled “Communicating Value in the Telecommunications Industry – 2002”, the survey looked into the drivers of value in the telecom industry and presented the findings from a trio of perspectives: telecom executives, investors and analysts.
The survey found that there is hidden value seen by telecom executives inside their organizations, which is not being communicated externally. This, in turn, affects external valuations of their organizations.
Investors and analysts cite a large number of performance measures that they deem particularly valuable, about which most telecom companies do not provide adequate external data. For example, 50 per cent of investors and 71 per cent of analysts believe that telecom companies are reporting either the bare minimum of information or very little more than legally required, compared to only 14 per cent of executives.
Telecom executives say they find certain performance measures particularly valuable in managing their company, yet they fail to actively communicate many of these measures externally. For example, 50 to 69 per cent of telecom executives view billing efficiency and accuracy performance measures as “moderately valuable”, while less than 50 per cent of investors would place a similar degree of emphasis on them.
Investors and analysts are focused on a variety of non-financial measures that are not necessarily deemed valuable by telecom executives. For example, where more than 70 per cent of investors and analysts would agree that research and development activities are ‘highly valuable’ performance measures, less than 50 per cent of telecom executives perceive R&D as “somewhat valuable.”
Investors and analysts believe that companies stand to gain some significant benefits including higher share prices, increased credibility of management and better access to capital, by improving their external reporting practices.
“With each party attaching a different weight to specific performance measures the fallout could be colossal,” says Joel Gazes, Value Reporting specialist for PricewaterhouseCoopers Information and Communications practice. “If analysts and investors receive insufficient information about the performance measures they view as important, it creates uncertainty in the market.”