Return on Investment (roi) for Multi-Technology son juan Ramiro, Mark Austin and Khalid Hamied

7.4.8. Sample Scenario and ROI

The assumptions for this sample calculation are listed in Table 7.5, and the assumed traffic growth profile is illustrated in Figure 7.18 (for both voice and traffic). As can be seen, the model is applied over a time window of 10 years. Figure 7.19 shows the number of additional carriers, E1 links, capacity sites and RNCs that need to be added to cope with the growing traffic, for both manual network management and Self-Optimization. The same trend is observed in all curves. As can be seen, the capacity gain provided by the application of SelfOptimization algorithms delays and reduces the need for HW expansions, since each network element is capable to carry more traffic. Moreover, the extra revenue per year due to reduced churn is depicted in Figure 7.20.
Applying the described methodology, the cash flow projection depicted in Figure 7.21 can be built and, assuming a discount rate of 20%, the resulting NPV (described in Equation 7.1) is €138.36 million, split in different c ategories as shown in Figure 7.22.
Table 7.5 Assumptions for the ROI assessment of Self-Optimization

Network size, limitations and initial configuration
Number of sites	10000
Sectors per site	3
Initial number of carriers per sector (year 1)	2
Initial number of E1 links per site (year 1)	2
RNCcapacity	500
MAXcarriers Subscribers, ARPU and churn	3
Number of subscribers	20 million
Monthly ARPU	€10
Churn rate (c)	10%
Fraction of churners due to bad network quality (cfn) Quality improvement due to SON	0.1
DCRManual	0.7%
DCRSON Capacity gain figures	0.5%
GSON	50%
XSON Initial average traffic per sector in the busy hour (year 1)	20%
Voice (R99)	5 Erlangs
Data (HSDPA) Traffic growth	300 kbps
Relative traffic growth pattern (%; years 2-10) Cost structure	[20, 20, 20, 20, 20, 20, 20, 20, 20] %
Annual OPEX per E1 link	€5000
CAPEX for extra carrier per sector	€15000
CAPEX for extra capacity site	€50000
CAPEX for extra RNC Capacity figures and other radio indicators	€100000
Radio interface capacity for only voice (R99)	21 Erlangs
Radio interface capacity for only data (HSDPA)	1600 kbps
Nett Iub capacity for only voice (R99, per E1 link)	25 Erlangs
Nett Iub capacity for only data (HSDPA, per E1 link)	630 kbps
Soft Handover Overhead	40%

In the following, a brief sensitivity analysis is provided in order to illustrate the dependence of the NPV on the traffic growth pattern (see Table 7.6). As can be seen, more aggressive traffic growth patterns result in higher ROI from the Self-Optimization functionalities, since a more aggressive traffic growth requires more capacity expansions and this constitutes a more adequate scenario to realize the benefits of capacity improvements.