WIXLIB

Capital AllocationManagementFebruary 2016

Effective capital allocation is at theheart of value creationCapital allocation decisionscan occur at all levels of anorganization, and usually meandifferent things to TheStakeholders2 2016. Para informações, contacte Deloitte Consultores S.ADistributeCapitalTheBusiness?Where should I invest the next dollar?How do I compare and trade-offcapital requests in my business?Will these investments help meachieve my corporate objectives?

Executives are not always aligned intheir investment prioritiesThe key is building on what theywant by focusing on what theyhave in common.Chief FinancialOfficer“Optimize cost”Build andoptimizea costefficientnetworkChief TechnicalOfficer“Build the bestnetwork”ShareholderReturnInnovate anddeliver services thatattract & maintainsubscribersDeliver excellentcustomerexperienceChief Marketing Officer“Attract and retainsubscribers”3 2016. Para informações, contacte Deloitte Consultores S.A

Achieving a more mature capital allocationprocess should be a goal of all telecom operatorGood decisions are already beingmade they just need to beoptimized.Current StateCapital Allocation MaturityDecisions are based on advocacyand who has the loudest voice inthe roomDecisions are not based advocacy,but on a thorough vetting process,evaluation and metrics thateffectively describe outcomesThere are many arguments in theorganization about who should befunded, and for how muchThe company adds an incrementto last year’s network capital baseto determine how much to budgetthis yearThe company knows it is spendinga lot on network capital, butdoesn’t have an appreciation ofwhether it is getting a return on itsinvestmentsProject owners are accountablefor time and cost not postimplementation benefit4 2016. Para informações, contacte Deloitte Consultores S.ALeadership within functional unitsunderstand they are allocating basedon the needs of the organization,not on the needs of the siloThe numerical basis for allocationis based on the logical, rationalreasoning for allocationThe company is better able to trackits spending and realize the returnson its investment through predefined metricsThe business has a formalized postinvestment appraisal process toshare best practices

how do we drive the biggest‘bang-for-the-buck’?5 2016. Para informações, contacte Deloitte Consultores S.A

Six issues challenge efficiency intelecom capital projectsMastering these capital projectchallenges will increase return oninvested capital.Lacking a good framing process means youdon’t know what problem you are solving,what you can do and what your companyreally wants. Discussing and defining theseissues up front is critical to solving the rightproblem and defining the choices you canmake.(1) Lack of clarity onwhat direction CapitalAllocation Plan shouldtakeThere are no systems in placethat support the decisionmaking process, where onecan track project status,spend, portfolio decisions andproject demand.No one has the ability to predict thefuture, so plans must be flexible enoughto weather change. Using a scenarioprocess up front will help identifypotential shocks so you can plan howyou will react before it becomes areality.(6) No systemto supportdecisions(5) Plan hasno flexibilityif externalenvironmentchangesIf you can measure it you can improveit. Defining key metrics early on givesyour business owners ability to measureand improve the project as it movesalong in its life cycle.6 2016. Para informações, contacte Deloitte Consultores S.ACapital ProjectChallengesImproving 6 keyareas will driveefficiencies intelecom capitalspending(4) Key metricsignored or notdeveloped to understandorganizational success(2) Fundingisn’t allocatedto the directownershiplevel(3) Theorganizationhas no processto decide whichinvestmentprojects to pursueHaving clarity aroundwho is responsible for thefunding being provided iskey to resolving the typicaldisagreements betweenparties within an organization,and it helps defineresponsibility and ownershipof the capital to make sure itis invested properly.Many organizations believethey have a great evaluationprocess, though that isnot always the case. Byestablishing early on arigorous selection process,your shareholders will havegreater confidence in yourselection process.

Start by a clear strategy andaccountabilityGain clarity of direction & intentand allocate a proper level offunding to the right owners(1) Lack of clarity onwhat direction CapitalAllocation Plan shouldtake(6) No systemto supportdecisionsSolution Highlights Deep framing, make sure we solve the rightproblems, build key relationships and havemeaningful conversations. Use drivers of shareholder value to determinewhere the capital needs to be allotted. Have key, upfront discussions about what theorganization wants as opposed to what thebusiness units want. Help the finance organization better understandthe value that is being proposed by theengineering group.7 2016. Para informações, contacte Deloitte Consultores S.A(5) Plan hasno flexibilityif externalenvironmentchangesCapital ProjectChallengesImproving 6 keyareas will driveefficiencies intelecom capitalspending(4) Key metricsignored or notdeveloped to understandorganizational success(2) Fundingisn’t allocatedto the directownershiplevel(3) Theorganizationhas no processto decide whichinvestmentprojects to pursue

Frame issues by asking the threekey questionsKnowing our frame helpsmake sure we solve the rightproblems.1What are wegoing to do?We create intent by askingwhat are we going to do andwho are the key stakeholderswe plan to include. Thisincludes surfacing all of the keyissues, uncertainties and biasesat the beginning.8 2016. Para informações, contacte Deloitte Consultores S.A2? Why are wegoing to do this?Getting clarity around thereasons for the project, andgetting stakeholder buy-in iscritical to the success of theproject. We should be askingthis question at the beginning,not the end of the project.3How will wedeterminesuccess?Determining success meansdetermining the key metricsthat we will use to help definethat success. Without predefined metrics, we cannotknow if we are successful.

Decisions on investments must bebased on clear criteriaInsight into to strategic goals,dependencies, real cost and realprofit will shed light into thedecision making process.(1) Lack of clarity onwhat direction CapitalAllocation Plan shouldtake(6) No systemto supportdecisionsSolution Highlights Projects need to be evaluated using the samecriteria. Develop standardized templates and tools forcollecting data efficiently and in the direction ofthe company strategy. Move typical decision-making out of thecompany’s comfort zone into one that is based onlogic and proper allocation of resources. Create a governance model and empower teamsto drive capital allocation.9 2016. Para informações, contacte Deloitte Consultores S.A(5) Plan hasno flexibilityif externalenvironmentchangesCapital ProjectChallengesImproving 6 keyareas will driveefficiencies intelecom capitalspending(4) Key metricsignored or notdeveloped to understandorganizational success(2) Fundingisn’t allocatedto the directownershiplevel(3) Theorganizationhas no processto decide whichinvestmentprojects to pursue

Building Better Business CasesHigh-stake investmentscan often benefit fromstructured framing androbust risk-and-returnanalysis in order todesign businesses casesthat make the most ofthe opportunity at hand.10 2016. Para informações, contacte Deloitte Consultores S.AFrame Risks and OpportunitiesFacilitated workshops with amulti-stakeholder group helpexplore risks & opportunitiesQuantify Value & Risk DriversExplore ways to mitigatedownsize and better leverageupside potential.Structure Decision AnalysisThe results of framing arestructured into value and riskdriver blueprint for analysis anddata collection.Compare AlternativesDevelop & Populate ModelsDevelop decision tree, linked toa dynamic Excel financial modelthat can compute probabilisticoutcomes under each branch.Support Decision MakingLeverage the analysis toWhat is the likelihood of successunder each alternative? How much inform discussions and answerquestions through additionalvalue is at stake?sensitivity analyses.

Define and develop metrics todetermine success of investmentsContinuous monitoring andflexibility in the process is key toensure sustainability.(1) Lack of clarity onwhat direction CapitalAllocation Plan shouldtake(6) No systemto supportdecisionsSolution Highlights Create measureable, actionable metrics that canbe used to understand whether investments areconsidered successful. Update plan with actuals on a regular basis. Continuously monitor plan & allocation of capitalto ensure consistency with organization’s goals. Test capital decision againts scenarios, monitor andadjust.11 2016. Para informações, contacte Deloitte Consultores S.A(5) Plan hasno flexibilityif externalenvironmentchangesCapital ProjectChallengesImproving 6 keyareas will driveefficiencies intelecom capitalspending(4) Key metricsignored or notdeveloped to understandorganizational success(2) Fundingisn’t allocatedto the directownershiplevel(3) Theorganizationhas no processto decide whichinvestmentprojects to pursue

Scenario analysis to allow forinformed investment choicesFullOpenAccessExample of wireless scenariosConsolidated‘Dumb Pipes’ Carriers operate spectrum,but do not monetize content.They own the rails, but not therailroad. Revenues decrease for carriers,increase for Android and Apple.Degree of Open‘Middle Earth’ Fragmented systems requirescarriers to work closely withmiddleware developers. 3-4 different wireless datastandards (i.e. GSM, CDMA two more) this results in higherexpenses.Degree of Operating System/OEM HarmonyHelping to frameuncertainty to empowermore robust investmentdesign and decisionmaking.‘Clash of Titans’ Epic battle between Verizonand AT&T versus Google andApple. Google buys spectrumfor content broadcast andapplications. Value capture limited by aconcentrated set of companies.Access Control‘Carriers Rule’ Relative price stability, fewerchoices, good for carriers. OEMs and Android/Appleremain fragmented andbeholden to carrier pricingmodels on both content anddevices.Fragmented12 2016. Para informações, contacte Deloitte Consultores S.A1. AnticipateBuild scenarios of thefuture.CarrierControlsAccess4. OperateManage portfolioof options. Preserve,exercise or abandon.2. FormulateCreate an optimalstrategy for eachscenario.3. AccumulateIdentify strategicoptions that workacross scenarios.These wireless scenarioshelped a client make betterdecisions about their externalenvironment.

Systems should be in place to automateprocesses & support analysisAutomation and visualization arekey to ensure trust in the processand drive adoption.(1) Lack of clarity onwhat direction CapitalAllocation Plan shouldtake(6) No systemto supportdecisionsSolution Highlights Project and Portfolio Solutions can shed some lightinto the Capital Projects bridging the gap betweenmarketing requirements, finance controls andnetwork execution. Periodically evaluate demand and current projectsto perform portfolio decisions. Analytics capabilities need to be put in place tomake sure the correct questions can be answeredby the Capital Allocation team.13 2016. Para informações, contacte Deloitte Consultores S.A(5) Plan hasno flexibilityif externalenvironmentchangesCapital ProjectChallengesImproving 6 keyareas will driveefficiencies intelecom capitalspending(4) Key metricsignored or notdeveloped to understandorganizational success(2) Fundingisn’t allocatedto the directownershiplevel(3) Theorganizationhas no processto decide whichinvestmentprojects to pursue