#InbuildingWireless – Payment Assumptions
This week we will discuss Error #2: Payment assumptions.
Mobile operators usually deploy in-building wireless systems to provide capacity offload from the macro network, or to gain/retain wireless users. The motivation for operator-deployed distributed antenna systems (DAS) is highly based on the return on investment (ROI) of their infrastructure expenses.
However, in today’s economy, mobile operators are most likely only going to provide the RF source, i.e. base stations or small cells, and not the distribution system to the enterprises. The exception would be a major venue such as a stadium, where mobile operators can justify the capital expenditure (CAPEX) based on the generated revenue. Therefore, enterprises must be prepared to make an investment themselves to reap the benefits of an in-building wireless system – be it driving employee’s productivity in an office, or increasing guests’ satisfaction in a hotel.
On the bright side, there are multiple financing options available for enterprises to make this investment, similar to purchasing a car. Financial options include outside financing or leasing the equipment. With leasing, a third-party financial company owns and finances the technology, while enterprises make payments on a monthly basis. This means that in-building wireless systems will shift from being considered a capital expenditure (CAPEX) to an annual operational expenditure (OPEX).
To dive a bit deeper, on the balance sheet CAPEX appears as a depreciating asset, whereas OPEX is a monthly expense and therefore more controllable, and most times more manageable. Often times, lease payments are fully tax deductible and with smaller monthly payments replacing upfront payments, it also brings significant cash-flow benefits.
CAPEX is usually budgeted once per year and enterprises might have to wait for the next cycle to implement a system. Whereas with monthly expense in the case of an OPEX, it is more controllable and probably more appealing to an executive team as it doesn’t tie up capital. In addition, by positioning in-building wireless as an annual OPEX, it becomes financially positioned alongside the other core cost of sales and profit. This is in alignment as having in-building coverage and capacity is directly tied to the increased in tenancy rate or increased in customers’ satisfaction, therefore, in-building wireless/DAS is viewed as an essential cost of doing business.
With that said, enterprises have different needs and financial constraints to consider. We recommend determining a payment method which best aligns with capital utilization model and the business requirements.
Stay tuned for next week’s error to avoid, where we will be discussing not accounting for operational expenditure (OPEX).
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