By Joseph George, Director Revenue Protection and Interconnect
The roaming arm of a mobile operator’s business should be the jewel in the crown of their revenue generating activities. If managed correctly, roaming services provide consumers with the voice and data connectivity they require when travelling and deliver the home network operator with a steady revenue stream.
However, the management of inter-operator tariffs (IOTs) can be a complex affair and if not conducted effectively can end up costing the operator more than they make. As with many things, the key to a successful roaming business lies in ensuring that the margins are adequate enough to make a return.
Roaming margins are managed at multiple levels, creating a complex environment where a number of factors need to be taken into consideration. For outbound retail roaming transactions, margins are calculated on the difference between the wholesale IOT agreed between the two operators providing the roaming service, and the retail roaming tariff offered to the subscriber. For inbound roaming, revenue is based on wholesale IOTs, with margin based upon the difference between the cost of providing network access and the wholesale roaming IOT. Margin calculations are further complicated by the need to consider a combination of other interconnection costs, as well as balancing ‘Steering of Roaming’ (SoR) and ‘Least Cost Routing’ (LCR) strategies.
There are a large number of elements that need to be balanced to ensure there is sufficient margin to make a roaming business profitable. Without an accurate means of comparing the interconnection element and the roaming element of a roaming call there is a danger of not knowing what the actual margins are, not being able to meet the margin targets or worse, actually losing money on some roaming agreements. Until recently, the means to monitor these types of transactions have been both time-consuming and potentially inaccurate, as they involve trying to reconcile large amounts of disparate data, using time-consuming manual calculations.
Faced with ever more pressure on margins and growing complexity in the management of inter-operator relationships, mobile operators need an extra dimension associated with understanding costs and margins for roaming. By gaining accurate and automated information about true roaming costs and margins, it is possible to use such information to develop steering, re-pricing, wholesale IOT and routing strategies, to ensure optimal margins and assure revenue, without the need for time consuming manual calculations or laborious data reconciliation. Through such mechanisms, operators can ensure that their roaming businesses deliver on their revenue promises and remain an important part of their businesses moving forward.