Citi Perspectives 2024 E-commerce Edition

24 | Services Citi Perspectives Tackling treasury challenges Telcos have a deserved reputation for being at the forefront of technological advances. The industry’s innovations enabled much of the world to switch to working remotely during the pandemic and the hybrid working trend is likely to endure. Telcos’ infrastructure has facilitated access to digital financial services, accelerating financial inclusion all around the world and enhancing customers’ experience. Telco treasuries have also become increasingly sophisticated in recent years and have never been better aligned with the business. For instance, many companies have significantly improved visibility and control of cash balances and short- term investments. The use of automated liquidity structures and forecasting methodologies to optimize cash utilization is also nowmore widespread (though far from ubiquitous). However, treasury also faces several perennial challenges, which despite advances in technology have yet to be resolved. These include: • Reconciling incoming payments against telco data —which spans call records, billing information and network usage — especially where telcos have multiple systems and processes, remains a challenge. • Costs associated with legacy payment methods, such as checks (especially in the U.S.) can be significant and time consuming and a suboptimal experience for customers. Payments may be made to customers for promotional offers, to address billing errors and for compensation relating to service interruptions. • Credit card reauthorization can be problematic where customers choose to pay their bills by a card, which then expires, increasing risk of churn. Connecting with the customer to reauthorize their card is time consuming and adds friction. • Working capital efficiency at telcos has improved significantly. However, the capital- intensive nature of the sector and the high unit cost of smartphones can tie up a substantial amount of working capital, making it challenging to maintain adequate day-to-day liquidity. In addition, telcos can experience seasonal and cyclical fluctuations, making working capital management more complex. • Cybersecurity has become increasingly important as telcos have digitalized their processes. The use of checks for rebates and other reasons also creates fraud risk. The use of automated liquidity structures and forecasting methodologies to optimize cash utilization is also now more widespread (though far from ubiquitous).