ARM Companies Dial-in on the Changing Telecommunications Industry

Changes in creditor markets affect the way receivables management companies do business. Successful ARM companies must adapt to these changes in order to continue to meet the needs of their clients. The forthcoming seventh edition of The Kaulkin Report offers analysis of five creditor industries that are evolving rapidly – credit cards, telecommunications, electric utilities, health-care, and government – and shows how their changing internal dynamics will likely come to affect the ARM companies that serve them.

To follow one example, the telecommunications industry had roughly 97 million cell phone subscribers in the U.S in 2000. By mid-year 2006, U.S. subscriptions had increased more than 225 percent to 219.4 million, according to CTIA, a Washington-based wireless trade association. This growth has come at the expense of land-based (wireline) telephone service which is increasingly becoming a smaller share of telecommunication companies’ revenues. In order to market wireline telephone service, many major providers now offer a bundled suite of products – commonly phone, internet, and cable television – as a way to bolster decreasing landline sales. Most industry experts are not yet ready to declare landlines entirely a thing of the past; wireline services will continue to exist, but for how long – and as what percentage of industry revenues – remains unanswered. Even as wireline units continue to weaken, expansion in other segments – especially wireless and data – will provide avenues for growth to integrated telecommunications providers.

Such industry-wide transitions put pressure on telecommunications services. Effective receivables management strategies must anticipate these changes and prepare to handle diverse, often bundled, revenue streams. A company like Verizon, for example, may have a customer that subscribes to a wireline-cable TV-internet “bundle” as well as a separate wireless package; if that customer fails to pay his wireless bill but keeps his bundle account current, Verizon will be challenged to contend with the delinquency of one part of the account while retaining the customer (and the revenue he brings) as a whole.

These circumstances will make ARM industry vendors increasingly attractive to the telecommunications industry to help manage their receivables. If you manage an experienced first-party firm, you can work to bring parts of a customer’s account current, reminding him of a past due bill. If the debt reaches a particular stage, you, as a contingency agency owner or executive, may be contracted to recover bad debt. And as the debt purchase market continues to specialize in specific asset classes, some telecommunications creditors may sell off portfolios of distressed receivables to debt buyers that work telecom accounts.

The seventh edition of The Kaulkin Report, Kaulkin Ginsberg Company’s biennial industry overview to be released in late summer 2007, explores emerging creditor-vendor relationships like these in order to help ARM companies like yours look to the future of the business. In addition, this comprehensive report will forecast trends in various market segments based on qualitative research drawn from scores of interviews with industry experts and quantitative analysis of economic factors that will shape the ARM industry in coming years.

Michael Klozotsky conducts custom research projects and writes publications focusing on the accounts receivable management industry for Kaulkin Ginsberg Company. Contact Michael at mklozotsky@kaulkin.com