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Financial Telecom Tech Evaluation using Solver

Financial Telecom Tech Evaluation using Solver

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Published by Vadan Mehta

Telecom world has witnessed remarkable technological advancement during last 15 years. Innovations in digital telephony and internet have reached to new horizons. Telecom world has moved from 1G (1st Generation ) to 3G (3rd generation) of telecom technologies. 1G, telecom technology involves, basic analog phone with dialing feature, 2G, introduced Mobile phones, while 3G is about converging mobile with laptop features. This document provides financial perspective for technological evaluation using Excel solver.

Telecom world has witnessed remarkable technological advancement during last 15 years. Innovations in digital telephony and internet have reached to new horizons. Telecom world has moved from 1G (1st Generation ) to 3G (3rd generation) of telecom technologies. 1G, telecom technology involves, basic analog phone with dialing feature, 2G, introduced Mobile phones, while 3G is about converging mobile with laptop features. This document provides financial perspective for technological evaluation using Excel solver.

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Published by: Vadan Mehta on May 15, 2011
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ORGANIZATION RESEARCH Financial Telecom Technological Evaluation using Solver
(HOME ASSIGNEMENT for PGCBM-17)

INTRODUCTION

Telecom world has witnessed remarkable technological advancement during last 15 years. Innovations in digital telephony and internet have reached to new horizons. Telecom world has moved from 1G (1st Generation ) to 3G (3rd generation) of telecom technologies. 1G, telecom technology involves, basic analog phone with dialing feature, 2G, introduced Mobile phones, while 3G is combination data and voice networks, means whatever you can do with laptop or PC, you can do with your mobile phone. The main differentiator from one generation to another is bandwidth capacity per access node. 1G capacity was 64 Kbps, while 3G is offering 2Mpbs. Newer applications such as gaming, movie streaming, Google map, etc have increased the bandwidth demand. Now user is demanding bandwidth upto 2Mbps to run his/her applications with lowest latency (delay in transmission). Telecom service provider has to deploy Broadband network to meet the growing subscriber demand. Wimax is latest standard in wireless technology, offering broadband connection. Wimax offers appx. 70 Mpbs speed at aggregation node. Since I am from Telecom background, I have attempted to use SOLVER to decide best available solution from different equipment vendors, offering Wimax Technology. I have used SOLVER to decide 1) Service provider perspective: to choose best equipment vendor, from financial perspective 2) Equipment Supplier perspective: to bid the best competitive price for equipment meant to sell.

Introduction
TATA teleservices are planning to deploy Wimax network for minimum 100000 subscribers to offer wirelesss broadband services. It has floated the RFP (Request for proposal ) documents. After technological evaluation, 4 equipment vendors selected.
1)AmanTel 2)TeleGlobe 3)Informica 4)WirelessWorld

Financial Methodology
From financial perspective, Service provider considers three major costs, while choosing technology. 1) Equipment Cost; Cost to buy Equipment 2) Installation Cost; Cost to install the equipment 3) Maintenance cost: cost to maintain the equipment Budget limit for each cost is as per table below:
Cost Type Equipment Cost per Equipment Installation Cost per Equipment Maintenance Cost per Equipment Budget limit ( mill USD) 600000 * 10000 * 20000 *

* All Costs are fictitious figures and used as an example for this assignment. Alll Equipment vendors are been told to submit their Proposal A. After proposal A, all equipment vendors will be shown the cost analysis and will be given 2nd chance to re-submit their optimized solution proposal (if required) as Proposal B.

Proposal A
In our example, service provider has decided to Broadband network for minimum 1 Lakh subscribers(1000000) in Mumbai city. Each equipment vendor has different capacity per equipment, as described :
Equipment Vendor AmanTel TeleGlobe Informica WirelessWorld Subscriber Capacity per Equipment(A) 3300 5000 10000 1000 Total Subscribers(B) 100000 100000 100000 100000 Equipment required (B/A) 30 20 10 100

. The financial costs per equipment vendors are based on equipment required for given subscriber data (1 Lakh in our case), featured offered and research expense. Cost structure for all vendors are as follows ( Maintenance Cost are on yearly basis) :
Equipment Vendor AmanTel TeleGlobe Informica WirelessWorld Equipment Cost per Equipment 55 45 65 35 Installation Cost per Equipment 25 20 25 35 Maintenance Cost per Equipment 20 5 15 5 Total Cost 100 70 105 75

From Table above, it is clear that Informica requires least number of equipment and highest cost per equipment. Profit is calculated 10 USD * number of equipment, for all equipment vendors. We are using Solver, to find the best optimum solution.

Solver Parameters
Variables: Max of Number of Equipment MaX Profit: 10* Number of equipment Variables: 1) Minimum Number of equipment required per equipment vendor 2) Budget constraints

Solver Snapshot

Solver Solution: Proposal A
AmanTel Number of Equipment Equip Cost per Equipment Installation Cost per Equipment Maintenance Cost per Equipment (yearly) Profit (Yearly) 30 55 25 20 TeleGlobe 275 45 20 5 Informica 10 65 25 15 WirelessWorld 100 35 35 5 18175 10000 2629 < < 600000 10000 20000 RFS

303

2746

100

1000

4149

Profit is calculated flatly for all equipment vendors as, 10 Mill USD per yer per equipment. Click to view

Solver file :Hom assignment v.2.xls

As per Solver, TeleGlobe give optimum solution and max profit as 2746 Mill USD per year for 275 Number of equipment ,thus supporting 1375000 Subscribers( 5000 (capacity per equipment) * 275)

Capacity Optimization for Amantel
After knowing the result of Proposal A, Amantel has decided to give competitive price in next round of bidding, proposal B. They found that total number of equipment to cater 1 Lakh subscriber is 30 as per existing equipment capacity. They observed that if they reduce the number of Equipment, Equipment Cost, Installation cost and Main. Cost will be reduced significantly. To reduce the number of Equipment, Capacity per equipment has to be increased. Capacity per equipment Engineering Total Number of equipment for given subscriber base Reverse Engineering Cost for Equipment

They have decided to use reverse engineering, means by deciding the cost of equipment first and hence deriving the required capacity per equipment. Amantel decided to use Solver to find number of equipment required at the cost of as follows:
COST Type Eqp Cost Inst cost Main Cost AmanTel Present Cost 55 25 20 AmanTel Target Cost 45 20 10

Solver Formulation:
1) Variable: Number of Equipment

2) Profit: MAX( Number of Equipment) 3) Constraints; Cost Constraints

Solver Snapshot:

Solver Solution
Capactiy Analysis for Amantel
Subscriber Capacity per Equipment Total Subscribers Equipment required

AmanTel

3300

100000

30
Total Subscribers Capacity Required per Equipment

Equipment Number Eqp Cost Inst cost Main Cost

20 0 0 0 < < <

Max 45 20 20

20

100000

5000

As per Solver Solution, to meet the budget demand, Amantel has to increase their equipment capacity from 3300 sub per equipment to 10,000 sub per equipment.

Proposal B
Amantel has done necessary changes in their configuration and hardware and able to increase the capacity from 3300 sub to 10,000 subscribers per equipment. Proposal B has re-submitted to TATA tele-services with optimized solution. Solver was again used to decide the best solution.

Solver snapshot for Proposal B:

SOLVER SOLUTION:
PROPOBAL B SUBMISSON AmanTel 293 Equip Cost per Equipment Installatin Cost per Equipment Maintance Cost per Equipment (yearly) 45 TeleGlobe 20 45 Informica 10 65 WirelessWorld 100 35 18213 < RFS

600000

20

20

25

35

10000

<

10000

20

5

15

5

6600

20000

Profit (Yearly)

2925

200

100

1000

4225

As per Solver in Proposal B, Amantel has scored much higher then others. Using Amantel Equipment, TATA indicom will use 293 equipment, catering total subscriber of, 146500, with annual profit of USD 2925, higher then proposal A.

Summary
We have used Excel Solver for following task 1) Maximizing profit, by maximizing number of equipment in Proposal A 2) In reverse engineering, to maximize the equipment capacity, in given price constraint. 3) Maximizing profit, by maximizing number of equipment in Proposal B.

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