finance excellence in a vuca world cfo roundtable meeting · 1997 kick-off creation of carrier...

Finance Excellence in a VUCA World CFO Roundtable Meeting Frédéric Salmon

•  Setting the scene o  My Corporate world

•  The VUCA specifics and how we manage them o  Changing telecom landscape o  Global economic activity, inflation, euro resilience and liquidity o  M&A as an answer to the money stock and low interests… but at which multiples… o  Tax considerations

•  Managing and transforming finance operations o  Building agility across the various finance functions o  Partnering with the business on a day to day to optimize shareholder value creation o  Declining productivity gains, to offset via innovation o  Anticipating corporate risks

Agenda

21/10/16 BICS Confidential 2

Setting the scene

My Corporate world


Sending End user

Receiving End user

Communication Service Providers

•  Fixed & Mobile Operators

•  MVNOs

•  OTTs

•  xSP’s

•  ICT

Communication Services Providers

•  Fixed & Mobile Operators

•  Mobile Operators

•  xSP’s International only Wholesale only

The world leading provider of international connectivity and interoperability services

My Corporate world


1997

Kick-off

Creation of Carrier & Wholesale business unit @ Belgacom

2001 – 2004

Diversify

Belgacom ICS goes mobile (products and customers)

2009

Consolidate (step 2)

JV with MTN

1998 – 2004

Become global: •  Investment in

intercontinental submarine cables

•  Offices in Asia Pacific, America and the Middle East

2005

Consolidate (Step 1)

•  Spin-off and creation of BICS

•  JV with Swisscom

2008 – 2015

Innovate & diversify •  IP network and products

•  Value Added Services

•  New segments: MVNOs, OTTs, Cloud providers, …

Revenue: 350 M€

Revenue: 855 M€ EBITDA: 27 M€ Cash Flow: 11 M€

Revenue: 1.616 M€ EBITDA: 160 M€ Cash flow: 124 M€

1997

2005

2015

Over 11 years: •  Ebitda x6

•  Operational Cash flow x11

•  Profitability (Ebitda margin) x3

My Corporate world


•  World leader in Mobile data services Messaging, 2G/3G/4G Roaming

•  World leading Voice Carrier with 26 Bio minutes (2015)

Global Reach 112+ points of presence worldwide, owned global network (terrestrial fiber and submarine cables)

Solid Company: Revenue 1.6 Bio €, EBITDA 160 Mio € (2015), debt free Shareholding: Proximus (57.6%), Swisscom (22.4%), MTN (20%)

> 500 employees, in 13 key locations around the globe

1000+ Customers

•  incl. 400+ mobile operators and MVNOs

•  incl. major OTTs

VUCA specifics and how

we manage them

7

Changing telecom landscape


Tier 1 MNOs

Technology Regulation

New M(V)NO’s

Cloud/API Providers OTT’s

IoT ICTs

•  B2B international telecom sector moderately impacted by global

economic cycles

o  Risks balanced via global geographic exposure...

o  … but some individual cases are brutal (e.g. Nigeria, Angola,

Zimbabwe)

•  Our organic hedge helps reducing FX exposure

•  Increased usage via retail tariff schemes promote volume growth and

absorb buying power considerations

•  Traditional Telcom biggest risk is disintermediation

Global economic activity, inflation, euro resilience and liquidity


M&A as an answer to the money stock and low interests… but at which multiples…


Tax considerations


Managing & transforming

finance operations

12

Managing & transforming finance operations…


Source: The DNA of the CFO, E&Y (2016)

A role in transformation…


The Performance

Leader

The Growth Champion

•  Required in highly diversified companies requiring rigorous analytics to compare performance across businesses, companies with aggressive growth or cost targets that must be met in the near term, or companies with scarce resources that must be carefully allocated.

•  Most common in industries with frequent disruptions that require dramatic changes in resource allocation—and in companies that plan to grow considerably or reshape their portfolio of businesses through aggressive M&A or divestiture programs.

The Finance Expert

•  Well suited to highly decentralized companies with stand-alone businesses or early-stage ones scaling up and professionalizing the finance function.

•  Best for any company whose top team otherwise lacks strong finance leadership—or whose finance department is inefficient or in disarray.

The Generalist

•  Often found in companies in mature sectors, where operational similarities across business units provide a good platform to rotate managers among businesses and into functional leadership roles.

•  Ideal for companies where personal influence is needed to get things done, engaging heavily in business operations and strategy.

Source: McKinsey & Company

The modern CFO is defined by the mix of finance and strategy Peter McLean, chairman of the Global Financial Officer Practice at the executive recruiter Korn/Ferry International

•  Defining the mission: “With the objective to optimize profitable cash flow generation, we act as reference point for

financial matters towards our internal and external stakeholders, by providing professional advice

and ensuring compliance with policies, standards and laws.

We collaborate as a team while providing the appropriate environment and inspiration to build

harmonious relationships with our counterparts”

•  In scope: Accounting, Controlling, Billing & Collection, Credit Risk

Management and Reference data

•  All starts with setting the direction and with the people

•  Transformation is a long journey, adhesion is key

•  Internal, near-shore, off-shore

Building agility across the various finance functions


•  Key success factors include quality and reliability of process execution

combined with delivery on the business case

o  Key drivers include motivated & knowledgeable people and very good management

off shore

Building agility across the various finance functions – a concrete example


•  TCS strategic BPO agreement since 2006

o  Currently 15% of BICS population

o  Covers a.o. billing & reference data finance functions

•  Challenge status quo

•  Key touch points for business partnering:

o  Monthly reporting

o  Yearly budget and long term plan

o  Opex / Capex approval process

o  Key customer projects

o  Credit risk management

Partnering with the business on a day to day to optimize shareholder value creation


Declining productivity gains, to offset via innovation


•  High EBITDA / FTE under pressure as legacy business plateau… but

still long tail

o  12% of margin from products not existing 3-4 years ago

•  360° Innovation approach:

o  Products

o  Tools & processes

o  People

•  Resources redeployment

•  Security and authentication are key themes going forward

Anticipating corporate risks


Impact on strategic plan objectives

Impact on budgeted Cash Flows

Level of Control

Risk categories Definition

Employees Skills & Motivation

Risks linked to Human Resources skills & availability

HR cost flexibility Risks linked to Human Resources flexibility and cost structure

Business Model Evolution Risks related to new technological ways to deliver communication services: mobile VoIP,messaging app's, etc.

Competitive Market Dynamics

Risks related to competitive situation, product portfolio and servicing levels

Legal/Regulatory Risks linked to laws or regulations to the disadvantage of the company

Product & Service performance

Risks linked of non meeting contractual commitments towards customers including failure to supply (i.e. quality & reliability issues)

Equipment & Technology Risks linked to improper functioning of equipment or IT applications generating service interruption &/or quality issues

Long term Ambitions & Short Term Return

Risks linked to impossibility to meet performance guidance given to the shareholders

Finance & Economic Climate

Risks linked to the economic crisis climate and decreasing customer purchasing power

Products & services portofolio

Risks linked to Inability to implement a new competitive product portfolio

Customer Experience Risks linked to customer satisfaction & loyalty (churn, ...)

Supply Chain Risks linked to vendors and outsourcing deals not meeting quality & performance requirements

Financial Risk Risks linked to FOREX (€/$,…) /Customer creditworthiness issues /political risk/embargo (Iran, Syria, Sudan,…)

Image & Reputation Risks linked to group perception by key stakeholders: general public, employees, opinion leaders, politics & press.

Governance & Compliance Risks linked to non respect of laws, bylaws, business ethics, Group policies, etc.

Fraud & Cybercrime Risks linked to external and internal fraud.

Disasters Risks linked to events outside the control of the company and its employees

Other Risks outside any of the above categories.(Please define)

finance excellence in a vuca world cfo roundtable meeting · 1997 kick-off creation of carrier...

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