Telecom New Product Decision Case Study

Using Lone Star’s Predictive Modeling Capabilities forNew Product Decisions

One of the largest telecommunication companies in the world, working with a strategic supplier, needed to decide if they should invest considerable capital to build out (or acquire) voice, video, and data assets throughout Europe.

The decision was large and complex. It involved understanding the impact of many uncertain variables including:• competitive pressure • technology acceptability and migration• service mix and enablement• multi-country aggregation and distribution of

content regulatory environments• and many other elements.

CHALLENGE

The complexity and uncertainty of the future environment made evaluating and understanding the impacts on critical marketing, operational, and financial metrics extremely difficult.

Lone Star was hired to develop enterprise models that represented an integrated look at

all major project elements.

It needed to provide rapid “what if” capability for variables like demand

fluctuation, technology insertion, and operational optimization.

It also had to be capable of optimizing the approach based on internal and external constraints.

The desire was to provide decision quality models and tools which enable quantitative, fact-based

assessments for making this strategically important and capital intensive decision.

Lone Star developed a suite of four models that focused on key decision criteria, measurable outcomes, and understanding and dynamically linking …

SOLUTION

1) demand drivers 2) network and transport capability requirements 3) applications, systems and content needs4) key operational, marketing, and financial metrics in order to predict likely outcomes.

The model incorporated over 2,400 variables, and each complete model run executed over a billion probability calculations to cover a five-year horizon.

This analysis enabled the client to greatly improve the confidence of their business decisions. Once developed, adjustments to the models could be made and run within a few minutes.

The client made successful and strategically important decisions based on this analysis.

These Lone Star models provided predictive and defendable outcomes in financial, marketing, and operational domains.

IMPACT

$Financial

• Revenue• EBITDA• Operating Profit• Capital Expenditures• Operating Cash Flow• Discounted cash flow• ROCE • NPV

Marketing

• Pay TV Annual Growth• % of Households with Pay TV Service• Total Available Video Decisions• Share of Video Decisions• # of Basic Package subscribers• # of Premium Package subscribers

Operational

• # of CO’s installed w/proper equipment• Homes Passed• Homes available for Marketing• Quarterly Churn Rate• Programming Content Cost/subscription• VoD Content Cost/subscription• Per Subscriber Acquisition Cost• Bandwidth by Type – Multi-cast, VoD VOIP ISP

The Client noted:

“The models ... provided deeply insightful work that transformed my firm's commercial understanding of a key focus area.”

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Main #......…….….(972) 690-9494Web Address…...www.Lone-Star.comContact………….…Matthew Bowers, VP Corporate Development