Home » General Health » Five Considerations for Realistic Network Synergy Savings

A primary reason for merger and acquisition or rival companies in the telecommunications industry is to achieve cost savings. One source for those savings comes from the network integration of both companies’ owned and leased network assets and expenses. These is a plethora of options to eliminate redundant network costs, but buyers of companies are often too optimistic in their expected synergy savings. As a result, they often failed to achieve their initial savings target. This article explains why many of these mergers failed to achieve their financial goals and what you can do to improve them.

There are many methods to identify network savings. Although there is no set rule for identifying network synergy savings, a general method is to group network savings by optimization types or by geographies after eliminating redundant savings. Unfortunately, this popular process of identifying network synergy savings fails to address key issues. There are five additional considerations before investing capital to acquire a company.

Coordination Wi-Fi Network Guys of Multiple Optimization Projects Some optimization projects aim to eliminate different parts of network costs within the same geographic area. Extra attention is required when dealing with many projects. Although these projects may deal with different parts of network costs, they are often inter dependent of each other. The network planner often fails to understand these key relationships between projects and his lack of understanding can result in under estimation of the project timeline while over estimating project savings.

The planner must appropriately adjust the timing of synergy savings, as other projects may need to wait until completion of the predecessor project. The planner may consider a short term fix such as renewing a leased circuit while waiting to initiate other inter dependent projects. For example, there is a limited capital funding to integrate the networks in the first year of the merger. Where there is no capital available, the planner decides to establish leased network hubs to consolidate both companies’ leased circuits instead of building a network to eliminate leased circuits.

The planner is uncertain that the capital will be available in the following year to build a network thus, he decides to establish the leased hubs with a five year term commitment. Because the termination liability charges to eliminate the leased hubs will be substantial as well as the cost of grooming will be prohibitive, the network builds will not be approved in the second year of the merger as indicated by the lower NPV. The first year decision to establish leased hubs constrained the combined company to initiate the better project in the second year.

Published at: Recent Health Articleshttp://recenthealtharticles.org

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