New research conducted by UK independent consultancy, Sagacity, has found that the UK telecoms industry is leaking £2.3 billion in revenue each year, thereby endangering jobs. Sagacity works alongside prominent telecoms companies, including TalkTalk, Sky, and VirginO2, and has offered significant insights into the revenue leakage problem affecting the industry.
On average, telecoms companies are not managing to collect a staggering 7.09% of the revenue they are owed. This deficit is leading to a 'black hole' billions deep, causing instability within an industry already grappling with financial challenges. A substantial 67% of senior professionals confessed that they do not have a solution to prevent this issue. Shockingly, over half (52%) believe that this level of revenue leakage could result in job losses.
One of the primary culprits behind such major revenue leakage includes the dispensing of giveaways, discounts and incorrect billing. Nearly all (92%) telecoms businesses have incorrectly offered chargeable equipment, extended free trials or services, or applied generous discounts. Moreover, an alarming 91% have involuntarily given customers chargeable services such as Disney+, Apple Music, Netflix, and phone insurance, without holding them accountable for the charges.
Hakim Akayour, Head of Revenue Assurance at Sagacity, conveyed concern regarding the severity of the situation. He stated, "A dedicated and mature Revenue Assurance function should limit telco revenue leakage to 0.5%; they have a lot of ground to make up if they want to reduce leakage down to this amount. While most telcos are aware that they have a revenue leakage problem, the billions of pounds being leaked may come as a surprise. However, it's not as simple as plugging one hole – there are lots of small leaks adding up to create a bigger problem."
The causes of revenue leakage not only encompass giveaways and discounts but also stem from incorrect billing and poor reconciliation processes. For instance, a considerable portion of telecoms companies (72%) do not bill some customers due to poor data reconciliation. Furthermore, most companies (91%) mistakenly offer certain services without generating charges for them. This hampers revenue collection, with over half (56%) attributing this to poor data reconciliation.
Addressing the concerning situation, Harry Dougall, CFO at Sagacity, emphasised on the urgency of improving existing processes. Dougall shared, "Telcos need to address poor processes and a lack of oversight as a matter of urgency. The first step towards regaining control is pinpointing processes that cause leakage the most often. Tasks involving manual intervention, complex hand-offs, high customer volumes and time pressures, are absolute breeding grounds for problems. Data quality must be absolutely paramount – 'garbage in, garbage out', as they say. Telcos need to make sure that data is being captured correctly, then regularly cleansed and updated. Getting a handle on processes and driving data quality will stem the tide of revenue leakage."