Impact of “Book Value” on Network Transformations
Remember when you bought a TV at your home, you
- Did some research,
- Decided a budget,
- Compared the options that you could afford,
- Online first and then at a store,
- You negotiated a discount or a freebie and
- Finally got to enjoy the TV
Do you also remember, that the very next year, you
- Discovered newer models being launched in the market
- LED or 4K or 3D became a reality
- A bigger TV was available in the price you paid
- Power consumption on new TV was lesser
- It had an intelligent interface and could respond to gestures
- And so on …
Did you buy the new TV next year? I guess no! You decided that the “OLD” TV
- Is still new
- Has a lot of life left
- Is good enough
- Does not have enough resale value to justify the new purchase
I guess you compromised and decided that you will buy an even better TV, next year or even the year after. New technology is not going to stop next year, that you must have some patience, and that you will buy the new TV only when the old one becomes an inconvenience or has completed the useful life.
Telecom operators also go through a similar process only it has some more nuances, legal and based on accounting principles. All assets are valued and depreciated over a specific period called “useful life”. If they replace an asset that still has “book value” the accounting word for useful life, they will have to scrap it and book expenses that affect their bottom line. Opex savings, as well as Capex savings, may not be able to justify the new purchase.
Sometimes you are quite sure that the technology you offer is the greatest, much better than what anyone else has to offer or what your Telecom customer has in their network and just wonder why do not these guys just get it? Please do consider that TV in your own home and wonder how you may resolve the situation?
In the case of that TV, you may be lured by a reasonable buy-back! and so is the case with Telcos!
Plan a reasonable buyback or wait for the right time!