Whitepaper on Customer & Product costing and Profitability analysis

Investaura is pleased to present its new whitepaper on Activity-Based Costing and Profitability Analysis, which provides a step-by-step roadmap for a successful implementation over a 5 week period.

Service Costing has the reputation to be complicated and time-consuming to implement. It doesn’t have to be so. Using the eTOM business process framework for telcos, as well as a top-down approach and a representative data set for a mobile service provider, this white paper presents the key steps for a rapid implementation undertaken over a five-week period with Prodacapo, the Activity-Based Costing (ABC) software platform. Once the initial model has been set up, it can easily be expanded as required.

White Paper on Fixed Asset Valuation & Fair Value Measurement

Investaura Management Consultants was engaged by a major telecom group to perform a comprehensive valuation on non-current assets in the telecommunications network operations run by the client in four countries.

The revaluation was undertaken in compliance with the IFRS framework, in particular IFRS 13 (Fair Value measurement), IAS 36 (impairment), IAS 16 (tangible non-current assets) and IAS 38 (intangibles).

Whereas writing down non-current assets when their value is impaired is generally standard practice under GAAP, reflecting the concept of prudence, IFRS allows for a re-valuation to both sides, including marking non-current assets up to market. The basis for measurement is either the cost model (historical cost less accumulated depreciation), or the revaluation model (fair market value).

Landmark project for a telco in MEA: Fixed Asset Valuation (IFRS 13)

Investaura has recently completed a fixed asset revaluation project for a major telecom service provider operating in multiple countries in the MEA region.

The project was undertaken over a 3-month period and looked into $1bn of fixed assets in the following asset classes: Land, Building, Towers, Telecoms equipment, Software, Spectrum and licences.

Investaura’s new book is now available on Amazon: “Business Planning for Managers and Entrepreneurs”

Investaura Management Consultants is pleased to announce the publication of its new book on Business Planning for Managers and Entrepreneurs (ISBN 978-3-9813734-2-4), written by Pierre A. Lurin, a Managing Partner at Investaura.

The paperback edition complements the hardback edition first published in 2010, which has been updated and improved. Apart from the new cover, the book addresses a wider audience and includes a foreward where the author shares his recent experience acquired over the period 2010-2014, as well as personal insight on current and future trends.

The business case for the German Electronic Toll Collection (ETC) system

One of the most controversial topics recently discussed in the political scene in Germany is the proposal by the German Ministry of Transportation to introduce a toll fee for passenger cars in the country.

In Germany until now, passenger cars pay no toll on roads and motorways. With about 60 million registered passenger cars and over 12.000 km of motorway infrastructure (‘Autobahn’), there is probably no other country worldwide that lets passenger cars take advantage of so many kilometres of roads for free and without any kind of toll.

This is about to change once the Ministry receives blessing for its proposal from the political landscape in Germany. Obviously, many aspects have been fiercely discussed already, ranging from legal issues regarding compliance with EU regulatory laws, to concerns on data privacy through to the question of the overall economics of the new system.

The project that has two different IRRs

When cash flows are ‘well-behaved’, then the IRR makes more or less sense, because you can argue that it is equivalent to the yield (interest rate) that a bond would pay to bondholders, and the cash flows are the (variable) coupons that you receive, and the Face Value of the bond is the cash flow you receive in the last year (at ‘exit’). Phew!

Let us take a look. In the ideal world, your cash flow stream might look like that, and the IRR is 15% in this case. In the last year, we have simply assumed that the business is sold at 5 times the cash flow generated in the previous year.

Business Planning Excel template for the telecoms and ICT industry

Finding a good business plan template in Excel format can be really hard, for the following reasons:

You need the right level of detail. More often than not, the templates provided by others (your corporate HQs, your boss, you name it) are much too detailed – if you work for a large company, you know what I mean. In those horrible templates, you really wonder who might ever read the hundreds and thousands of rows that try to forecast what could happen 10 years down the road….


If you are looking at an existing business, the financial projections should also take the recent past into account. Too often, the templates don’t seem to care about what happened in the last couple of years. If you haven’t analysed the recent performance of the company, how can you pretend that your 7-10 year forecast is realistic?

Forecasting ‘costs’ is hard, but forecasting markets and revenues is really a lot harder. One way to address this problem is to forecast the market in two different manners: by regions / countries on one hand, and by products / product lines on the other hand. And then reconcile them so that the two projections are aligned.

Finally, the financial plan must look good. Not only it must support the story that you are trying to sell (to your management, or to investors), but it must also be visually appealing.

In the ICT industry, there are quite a lot of software and service businesses (as well as hardware, for sure), with the added charm that gross margins can be (very) high, and working capital requirements low (who doesn’t love prepayments or annual software / service fees paid upfront?). So we have reflected these salient features of the ICT industry in the template below.

Enjoy the template in PDF format!

Download “Business Plan in the ICT industry Template” INVESTAURA_Business-Planning-Template.pdf – Downloaded 4066 times – 1 MB

You need to register for free as a ‘Business Plan’ member on our ‘The Art of Business Planning’ web site to download the Business Plan template in Excel (more than 7500 downloads). Go to the registration page

Financial ratio analysis: FREE Excel template!

There are 4 main categories of financial ratios and KPIs used by financial practitioners, each addressing a specific question:

Question 1: “Is the business profitable?” -> Profitability ratios, calculated from the P&L (e.g. Gross margin, EBITDA margin, EBIT margin)

Question 2: “Is the business liquid in the short term?” -> Liquitidity ratios, calculated from the Balance Sheet (e.g. current ratio, liquid ratio, cash ratio)

Question 3: “Is the business financially stable in the long term?” –Stability ratios, calculated from the Balance Sheet (e.g. debt-to-equity ratio, gearing, debt cover ratio)

Question 4: “Is profitability high enough compared to what we have invested?” –Capital Efficiency ratios (e.g. ROE taking an ‘equity’ perspective; ROIC taking an ‘entity’ point of view).

Ten years holding shares in France Telecom: I can’t see the ‘Orange’, I can only see ‘red’

Ten years ago, I bought shares in Orange (the mobile business) and France Telecom (the parent of Orange), which are now one and the same company. I made two mistakes at the time:

  • After France Telecom’s share price had gone down by more than 80%, I thought that it was strongly protected against further price decrease, and would go up over the long term. It didn’t.
  • Even if profit margins in France were to decrease under competitive pressure in the fixed line business, I thought that France Telecom’s turnover would go up, driven by mobile services and the international business. It didn’t either.

So I was double wrong. And this is what happened to my original investment. Not a disaster, but certainly not great. Time to fire France Telecom?

The acquisition of WhatsApp by Facebook: too expensive, or too cheap?

Obviously the SMS business has been a cash-cow for mobile operators for close to 20 years now, and it was high time that something happens to shake-up the status quo. This seems to be exactly what the WhatsApp team has managed to do. No surprise that it didn’t get unnoticed. On 19th February 2014, Facebook announced that it had agreed to acquire WhatsApp, a 50-staff company, for $19 billion (about 20% in cash and the rest in equity).

This looks mind-boggling at first. But WhatsApp currently has 450 million (mobile) users world wide. Also, in view of recent social media transactions, the pricing of the WhatsApp acquisition does not look so crazy. Sure, the Zuckerberg ‘kid’ and his shareholders must know what they are doing?

The Cray2 computer that I used 20 years ago now sits in my living room: it is called the iPad2 and costs $500, not $30million

Back in the early 1990s, I used a Cray2 computer. Only 27 of them were made and sold worldwide, for a price tag of $17m (per unit), or about $30m in 2014 dollars.

Since its commercialisation in 1985, the price of the Cray2 computer has gone down by a factor 100 000, equivalent to -35% per annum. Its form factor has also changed a bit.

Believe it or not, the iPad2 (2011) is as powerful as the Cray2 computer of the late 1980s. Its commercial success has also been larger: tens of millions of iPad2 have been sold so far. And it is still selling.

Business Planning and Costing made easy: free financial template!

Business planning and costing don’t have to be complicated. They aren’t! INVESTAURA is pleased to provide you with this simple Excel template to help you get started.

You need to register for free as a ‘Discovery’ member on this web site to download the Business Planning and Costing simple Excel template (more than 1800 downloads). Go to the registration page.

Supply side forecasting: Forget Moore’s law, there is now a better model

“Prediction is very difficult, especially if it is about the future”

Nils Bohr, Nobel laureate in Physics

Yes, forecasting can be hard. But on the supply side, the good news is that many technologies display constant growth rate over time. This means that capacity is growing exponentially and when plotted on a logarithmic scale, capacity is a linear function of time. Sounds familiar? Yes, this is Moore’s law: the number of transistor per chip has been correctly predicted by to double every 2 years on average since the 1960s, giving an annual growth rate of +40%.

Our highly popular Seminar on ‘Finance for non-Financial Managers’ is coming to you

Have you ever wished that you would better understand Finance and Business Planning? Maybe with a view to take ‘Profit responsibility’ within your company?

Then this seminar is for you.

Accounting and Finance are not hard to learn, and everybody can learn them. The 3-day training will bring you up to speed with the key concepts used in Finance: the difference between cash and profit; key financial ratios; valuation of businesses and investment plans; the cost of capital, and many more.

In addition to trainer-led presentations that are richly illustrated with examples from the Telecoms & IT industry, the participants will solve a series of exercises and work on the ‘TetraStars’ case study.