Telecom Business, Tariffs, and Customer Operations
This domain tests commercial literacy: the metrics that describe a subscriber base, how tariff structures and billing increments change revenue, and the systems that take an order through to cash. Expect one calculation question and several definitional ones.
Core metrics
- ARPU is revenue per user per period; ARPA is per account, which differs when one household holds several SIMs. Churn is the proportion of subscribers lost in a period; distinguish gross churn (lost) from net churn (lost minus gained) and use the correct denominator (start-of-period or average base).
- CAC is subscriber acquisition cost; SAC is subsidy plus commission. CLV (customer lifetime value) approximates ARPU × margin ÷ monthly churn rate. EBITDA is earnings before interest, tax, depreciation and amortisation - a profitability proxy, not cash flow. Capex intensity = capex ÷ revenue.
Tariff design
- Structures: flat rate, usage-based, tiered (data buckets), bundles (voice + data + content), on-net/off-net differentials, peak/off-peak pricing, and add-ons.
- Billing increments matter: 60/60 rounding rounds every call up to a full minute, 1/1 charges per second. Shifting from 60/60 to 1/1 can cut voice revenue substantially on short calls even with an unchanged headline rate.
- Wholesale and regulatory charges: mobile termination rate (MTR), roaming, access and interconnection fees. Competition authorities test for margin squeeze and predatory pricing.
Customer operations
- BSS: CRM, product catalogue, rating, mediation of CDRs, invoicing, dunning and collections. OSS: provisioning, activation and assurance. Order-to-cash spans both.
- Service measures: NPS, first-call resolution, average handling time, complaint volume, number portability turnaround. Disputes require CDR evidence and a clear credit policy.
Worked example
ARPU is $18, EBITDA margin 35%, monthly churn 2.5%. CLV = (18 × 0.35) ÷ 0.025 = $252. A retention programme costing $60 per saved subscriber that reduces churn to 1.5% yields CLV = 6.3 ÷ 0.015 = $420. The uplift of $168 per subscriber exceeds the $60 cost, so the programme is justified - provided the churn reduction persists and the offer does not cannibalise full-price plans.
Traps that cost marks
- Using revenue where margin belongs in a CLV or profitability calculation.
- Comparing monthly and annual churn without converting.
- Confusing ARPU with ARPA in multi-SIM households.
- Ignoring billing increment effects when comparing headline tariffs.
- Treating EBITDA as cash flow or as net profit.