When profitability depends on creative cost control
A European telecommunications operator boasted tens of millions of subscribers. But as the telecom market contracted, the company’s revenues were stagnating, and EBITDA was falling far short of targets. Management set an ambitious goal of closing a nearly €80-million EBITDA gap and brought in AlixPartners to launch a program that would achieve it.
A rapid diagnostic uncovers multiple savings opportunities
Our team started off by conducting our proprietary QuickStrike® diagnostic to find some near-term savings opportunities that could be implemented immediately—as well as to uncover deeper performance problems that could be fixed in the longer term. Drawing on our industry knowledge and proprietary “Lean Telco” best-in-class benchmarking tools, we closely examined several dozen of the company’s major business processes. We also paid special attention to cost reduction opportunities in the company’s procurement functions, focusing on major items such as IT CAPEX and OPEX as well as customer service.
In just six weeks, we identified multiple opportunities to make the company more efficient and rein in costs in every corner of the organization. Examples included pooling staff when possible to reduce overlap, reallocating workers to improve process efficiency, and renegotiating contract terms with vendors. On the margin improvement front, we quickly identified opportunities to boost EBITDA through methods like upgrading the company’s IT and simplifying its product offerings. We also quantified the results we thought the company could generate by exploiting those opportunities.
When it really matters
We compiled all of our findings and ideas into an action plan and presented it to the management team, which reviewed and approved the plan after setting cost reduction targets for major areas of the business such as overhead, sales force efficiency, OPEX, and procurement. The targets added up to nearly €180 million in total—hitting management’s ambitious savings goal. Even more promising, we helped management set a long-term EBITDA-improvement target of several hundred million dollars more. In fact, one year later, EBITDA had already improved by around 4%, and the company’s future looks bright.