Industry issue: Regulation

Telecom companies worldwide are heavily regulated, but big changes are underway. In 2003, the European Union reduced the regulatory burden in some areas but increased regulatory uncertainty in others, including mobile services. In addition, in 2005 it became compulsory for all listed companies in EU member countries to begin reporting under International Financial Reporting Standards (IFRS) & the biggest accounting change to take place over the last generation.

In Asia Pacific markets, new technologies and rapid adoption of broadband are necessitating technology-neutral regulation. U.S. telecom reformers want to review everything from inter-carrier compensation and UNE rules, to VoIP and broadband regulation. Added in to this mix is the Sarbanes-Oxley Act, legislation that established a new mandate for corporate responsibility, accountability, transparency and behaviour.

So what's at stake?

The new EU framework brings with it the burden of ex-ante regulation and requires an EU-wide competitive analysis, complete with regulatory remedies for 18 markets, mobile call termination price caps, and new directives for roaming charges.

Conversion to IFRS is much more than a technical accounting issue. The communications industry, perhaps more so than many other industries, is subject to complex revenue arrangements as well as having large tangible and intangible asset bases. The changes in accounting rules brought about by the introduction of IFRS will have a significant impact on how these elements are reported. The ability to deal with the changes in a coherent and consistent way is vital to ensuring accurate corporate reporting and, ultimately, maintaining shareholder value.

Asia Pacific telcos struggle with interconnection pricing strategies and disputes, pricing restrictions, SLAs and the complexities of evolving performance metrics and regulatory frameworks. U.S. players want a thorough understanding of the rules of the road before investing in innovative VoIP strategies and other IP-based services, or venturing into new markets like fibre to the curb, home or node.

How PwC can help you

New regulations raise questions of costs and consequences. PricewaterhouseCoopers offers a range of services designed to help telcos develop and maintain a comprehensive regulatory strategy, including scenario planning, policy definition, strategic communications, and a well-organised regulatory function with the processes and procedures needed to achieve objectives.

Additionally, we offer integrated regulatory and internal costing systems, performance measures, and litigation support for a wide range of regulatory investigations. We can also help clients with their conversion to IFRS and transition first-year Sarbanes-Oxley 404 implementation efforts into efficient, cost-effective and sustainable processes.