The CFO’s New Clothes
Opportunities for Chief Financial Officers in the telecommunications industry to take on a new leadership role
The increasing market saturation combined with the mounting financial crisis is having its effects on many telecommunications operators. More than ever, the support of the Chief Finance Officer is needed when telecommunications operators steer through these troubled waters. However, many of them are still more focused on operational financial activities than on Strategic Business Decision Support. This article examines the current situation of the role of the Chief Finance Officer and provides a view on its growth opportunities given the new challenges of the financial crisis.
As telecommunications consumer spending surveys1 show, most consumers are not likely to significantly alter their telecommunications spending behavior in the short term even though they might be hit by the financial crisis. Nevertheless, consumers ask for more service at the same or even lower price. Given the high degree of competition, the low level of differentiation and the regulated ease of migration (e.g. mobile number portability) in many telecommunications markets, consumers easily churn to those operators that service their needs best. As a result, telecommunications operators feel the market pressure to keep up high investments in innovation, infrastructure roll-out and service improvement and the financial pressure to find new funding sources at an acceptable cost. While those operators with strong operating cash flows and high levels of reserves find the current situation appealing, those that are in a less fortunate position are struggling. In both cases, the business is increasingly looking to the Chief Finance Officer to explain either what to do with the excess cash reserves or how to improve the cash flow. As a result, the position of the Chief Finance Officer is elevated from a “number crunching externally focused administrative function” to one that is at the heart of strategic decision-making.
But is the Chief Finance Officer up for it?
From Scorekeeper to Business Partner
Based on Detecon’s assessment of 20 projects conducted for telecommunications operators globally in the last two years2, the answer to that question is unsurprisingly clear: No, most Chief Finance Officers are not yet ready! Most remain focused on bringing the timeliness, accuracy and productivity of basic transactional accounting, treasury and controlling activities to levels which are more acceptable to auditors and shareholders. Beyond that, most Chief Finance Officers have hardly any time and resources available to actively, and also in a sustainable form, focus on the more strategic business aspects of their job. In detail:Next page