Telco Capital

Expenditure Reduction
Contact: Chris Harrop
Mike Garstka
James Rauen
Date: June 2001
Copyright© 2000 Bain & Company, Inc.

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If you have questions, please contact Chris Harrop, the VP

in Sydney responsible for the Optus relationship
CapitalExpenditureReduct
ion 2
Optus Relationship
1. Eliminate low-return capital investments

Initiative Result Case

 Re-prioritize  Reduced in-year  P2T Phase 1
investment capital budget
program based on from ~$1.5B to
CFROI and margin target of ~$1.1B
contribution
 Add rigorous  These changes  Y20, P5T
gates and KPIs to have recently
product been implemented
development following an
process organisational
restructure
 Change product  This project is still  P7T Business
mix in favor of underway as of 1 Components
offerings with Jun 2001 Analysis
higher ROA

CapitalExpenditureReduct
ion 3
Optus Relationship
2. Reduce asset construction process costs

Initiative Result Case

 Coordinate sales  Increased  Y23
and installation of installations per
residential cable technician per day
connections by 55%

 Coordinate sales  Reduced  Y57

and installation of installation cycle
business customer time by 35% over
connections a period where
volume grew by
100%

CapitalExpenditureReduct
ion 4
Optus Relationship
3. Reduce cost of procured assets

Initiative Result Case

 Renegotiate price  Reduced price  Y19
with network paid for customer
equipment premise
vendors, based on equipment by
assessment of 10-20%
their cost
structure
 Consolidate  Reduced cost of  Y54
vendors and procured indirect
improve services by $25M
processes by
which these
services are
procured (much of
this cost is
capitalized)

CapitalExpenditureReduct
ion 5
Optus Relationship
4. Improve timing of investments

Initiative Result Case

 Create planning  “Red-yellow-  Y19
cell and BAPUG green” building
report developed;
salesforce
targeted at
accessible
buildings;
network spend
timing improved

CapitalExpenditureReduct
ion 6
Optus Relationship
5. Improve budget and planning processes

Initiative Result Case

 Link planning  Capital  P2T Phase 2
process to targets expenditure
for revenue, processes
profit, capex, changed to
ROACE; tighten tighten criteria for
process for projects
approval of
expenditures

CapitalExpenditureReduct
ion 7
Optus Relationship