Churn Management, Fraud Prevention and M&A Issue Mitigation

The communications industry, across its individual service verticals – wireless and fixed-line operators, cable MSPs & MVNOs -, has traditionally always faced problems relating to the analysis of the massive amounts of data their operations generate. Recently, evolving pricing, offering and even business models, as well as a spate of mergers and acquisitions, have compounded the challenge.  Especially in mature markets, where an ever-shrinking number of larger players dominate and profit margins are shrinking continuously, discovering actionable information hidden in that data is critical.

Among the most significant challenges the communications industry is facing today are churn, fraud and the mitigation of M&A-associated challenges.

Churn Management

Churn is a composite word cobbled together from ‘change’ and ‘turn’. Managing churn is essentially an exercise in strategic customer retention. It is considered particularly relevant in industries like telecommunications, where customers are bound to a provider contractually for a period of time for their mobile phone usage, for example, but are free to switch to another provider once that contract has expired. The importance of managing churn cannot be overstated – many providers, especially in mature markets, suffer from up to 30% churn in their customer base, and the costs of acquiring new customers versus keeping existing ones are prohibitively high.

Effective churn management accomplishes two things – firstly, it identifies customers the provider is in danger of losing before their contract expires. Then, by offering changes in pricing or service thought to be attractive enough to that customer to motivate a new contract closure, the provider seeks to bind that customer for another contract cycle.

However, based on calculations around customer lifetime value, it quickly becomes clear that not all customers are profitable. Customer retention initiatives are expensive, and often fail if the net is cast indiscriminately. Since different ‘valuable’ customer segments will be motivated to renew by different offers and approaches, targeting those resource-intensive retention efforts is critical. So, secondly, providers need to identify which customers it makes economic sense to ‘invest in’ to keep, and which ones can be ‘let go’ without consequence.

With Panoratio, operators can quickly profile customers across every relevant data source without pre-existing aggregations and do so in full granularity. With our patented in-memory technology, you will immediately understand which of your customer segments you are in danger of losing, and based on, for example, their usage and customer service records, what offers might motivate them to remain your customers. PanoSIGHT serves as the powerful basis for effective customer retention and churn management initiatives.

Fraud Management

In 2006, the Communications Fraud Control Association (CFCA), an organization focusing on fraud in the global telecoms industry, released the results of its global telecommunications fraud survey. The implications for the profitability of communications operators are devastating. In 2005 alone, mobile phone companies experienced over $60 million in lost revenues due to fraud, representing an increase of 52% since 2003 and swallowing ca 5% of their total revenue. It is not uncommon for smaller operators to lose around a quarter of their revenue to fraud. Globally across the telecom industry, annual global fraud losses are estimated to be in the range of $55 - $60 billion (USD) range…annually.

Detecting fraud is one thing, detecting it early enough to prevent it another. With the convergence of networks and the increasing complexity of the services offered over those networks expanding constantly, current fraud detection efforts based on conventional rule creation and threshold definitions are often a case of ‘too little, too late’. 

Effective fraud management initiatives consist of three phases, respectively focusing on detection, investigation and prevention. With Panoratio, operators can detect patterns of unusual behavior and known types of fraud, examine these patterns for the possibility of fraud, and then use that knowledge as the basis for upgrading to  their ‘defense mechanisms; and preventing that kind of fraud in the future.  Because Panoratio’s technology enables fraud specialists to analyze across the complete spectrum of relevant data (SS7, VoIP, SIP, IP records…) and to receive immediate answers, operators are now able to detect - and prevent - fraud more consistently.

Mitigating Merger & Acquisition Challenges

The telecommunications industry is well-known for its M&A activity. Operators rarely develop organically, instead usually growing over time through fusions and mergers. Each acquisition brings with it yet another organizational structure, network topology, and data warehousing approach. Establishing a clear view with current technologies across an operator that is essentially a patchwork of smaller entities is not possible. Often enough, even years after a merger, customer information data sources remain separate. However, when it comes to unifying an operator’s insight across its entire customer base, it becomes a prerequisite. Otherwise, the potential synergies that led to the merger in the first place will remain unfulfilled.

Cingular’s acquisition by AT&T serves as an excellent, if unintentionally entertaining, example. Cingular, a large wireless provider in North America, was initially co-owned by Bell South and SBC. SBC itself was the result of a merger between Southwestern Bell and Ameritech, which in turn was a conglomerate consisting of Illinois Bell, Wisconsin Bell, Ohio Bell, Michigan Bell and Indiana Bell, all of which at one point were a part of AT&T. Cingular subsequently bought AT&T’s wireless division, while SBC acquired the remaining AT&T assets, renaming itself AT&T in the process. The new AT&T then acquired Bell South, Cingular’s other co-owner, thus necessitating Cingular’s rebranding to AT&T as well.

Each one of those providers possessed its own, usually bespoke data ecosystem. If your job was analyzing that collective customer base, you would not enjoy going to work in the morning.

The ability of Panoratio’s software to compress and store data in-memory, in full granularity and without any pre-aggregations whatsoever, can enable operators to much more quickly realize the potential synergies that drive M&A activity. Using standard hardware, operators are able to pull all customer and customer-related data from myriad different sources into one lean data warehouse.

Beyond these telecom-specific applications, Panoratio’s software can obviously be used to support and improve other initiatives, such as

• Cost-saving and efficiency maximization efforts
• New and unique customer segment discovery
• Year-over-year comparative analysis of customer behavior and campaigns
• Price plan optimizations
• Report generation