International benchmarking constitutes a fundamental tool in TMT regulation and strategy, enabling systematic comparison of performance, tariffs, and practices across operators or markets. Widely employed by regulators (Ofcom, ARCEP, BEREC, ITU) and investors alike, benchmarking provides an objective framework for assessing competitiveness and identifying best practices.
This article examines the methodological foundations, practical implementation, and applications of international benchmarking, drawing on EXXING's experience conducting benchmark studies across European and African telecommunications markets.
Methodological Foundations
Definition and Purpose
Benchmarking is the systematic process of comparing an organisation, product, or process against reference peers to identify performance gaps and improvement opportunities [1]. Unlike simple comparison, rigorous benchmarking requires:
- Structured methodology: Consistent data collection and analysis
- Appropriate peer selection: Comparable entities on relevant dimensions
- Actionable insights: Findings that inform decisions
Types of Benchmarking
| Type | Comparison Basis | TMT Application | Example |
|---|---|---|---|
| Internal | Units within same organisation | Regional performance | Orange France vs Orange Spain ARPU |
| Competitive | Direct competitors | Market positioning | Vodafone vs Orange vs Telefónica |
| Functional | Sector leaders (non-competitors) | Best practices | Telecom NPS vs banking NPS |
| Generic | Any organisation | Cross-sector processes | Telecom supply chain vs retail |
| International | Peers across countries | Regulatory, strategic | UK mobile prices vs EU average |
International benchmarking—comparing across national boundaries—presents particular methodological challenges around currency conversion, purchasing power adjustment, and regulatory context.
Theoretical Underpinnings
Benchmarking draws on several theoretical traditions:
Competitive Analysis: Porter's framework for understanding industry structure and competitive positioning provides context for interpreting benchmark results [2].
Efficiency Measurement: Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) provide formal methods for identifying efficient frontiers against which to benchmark [3].
Regulatory Economics: Yardstick competition theory demonstrates how benchmarking can substitute for direct competition in regulated industries, creating incentives for efficiency [4].
Implementation Methodology
Step One: Scope Definition
Effective benchmarking requires precise scope definition addressing:
| Question | Consideration | Example |
|---|---|---|
| What to benchmark | Tariffs, network quality, efficiency, customer satisfaction | Mobile data prices per GB |
| Who to include | Markets, operators, segments | Top 3 operators in 15 African markets |
| Why benchmarking | Regulation, strategy, due diligence | Regulatory price review |
| When to measure | Point-in-time vs time series | Q4 2024 snapshot |
Case Study: African Mobile Tariff Benchmark
EXXING conducted a mobile tariff benchmark for a pan-African investment fund:
| Parameter | Definition |
|---|---|
| Metric | Mobile basket price (100 voice minutes + 1 GB data + 50 SMS) |
| Markets | 15 sub-Saharan African countries |
| Operators | Market leaders (MNOs, excluding MVNOs) |
| Period | Q4 2024 |
| Sources | Operator websites, GSMA Intelligence, regulatory filings |
Step Two: Peer Selection
Peer selection critically affects benchmark validity. Inappropriate peers produce misleading conclusions.
Selection Criteria:
| Criterion | Rationale | Application |
|---|---|---|
| Market size | Economies of scale affect costs and prices | Compare Nigeria (220M population) with Kenya (55M), not Djibouti (1M) |
| Development level | Purchasing power affects affordability | Compare similar GDP per capita (Morocco vs Tunisia, not vs Switzerland) |
| Market maturity | Penetration and competition affect dynamics | Compare mature markets (UK vs France) or emerging (Nigeria vs Kenya) |
| Technology | Network generation affects cost structure | Compare operators with similar 4G/5G deployment |
| Regulatory framework | Regulation affects prices and investment | Compare liberalised markets vs monopolies separately |
Peer Selection Matrix:
For the African mobile benchmark, EXXING developed a peer selection matrix:
| Country | Population (M) | GDP/capita ($) | Mobile Penetration | Peer Group |
|---|---|---|---|---|
| Nigeria | 220 | 2,200 | 87% | Large emerging |
| Kenya | 55 | 2,100 | 114% | Large emerging |
| Ghana | 33 | 2,400 | 138% | Medium emerging |
| Senegal | 18 | 1,600 | 119% | Medium emerging |
| Ivory Coast | 28 | 2,500 | 145% | Medium emerging |
Step Three: Data Collection
Data quality determines benchmark reliability. Key considerations include:
Data Sources:
| Source Type | Advantages | Limitations |
|---|---|---|
| Regulatory filings | Official, standardised | May be delayed, limited detail |
| Operator reports | Detailed, timely | Varying definitions, potential bias |
| Industry databases | Consistent methodology | Subscription cost, coverage gaps |
| Primary research | Tailored to needs | Time and cost intensive |
Standardisation Requirements:
| Dimension | Standardisation Approach |
|---|---|
| Currency | Convert to common currency (USD, EUR) at period-average rates |
| Purchasing power | Adjust using PPP factors for affordability analysis |
| Taxation | Report pre-tax and post-tax figures separately |
| Bundle composition | Define standard baskets (ITU, OECD methodologies) |
| Time period | Align measurement dates across markets |
ITU ICT Price Baskets: The International Telecommunication Union publishes standardised price basket methodologies enabling consistent international comparison [5]:
| Basket | Composition |
|---|---|
| Mobile cellular | 70 minutes voice + 20 SMS + 500 MB data |
| Fixed broadband | 5 GB data allowance, entry-level speed |
| Mobile broadband | 2 GB data allowance |
Step Four: Analysis and Adjustment
Raw benchmark data requires analysis and adjustment to yield meaningful insights.
Statistical Analysis:
| Technique | Application |
|---|---|
| Descriptive statistics | Mean, median, range, standard deviation |
| Percentile ranking | Position relative to peer group |
| Trend analysis | Change over time |
| Correlation analysis | Relationship between variables |
| Regression analysis | Controlling for structural differences |
Adjustment Methodologies:
Purchasing Power Parity (PPP): Adjusts for differences in price levels across countries.
PPP-Adjusted Price = Nominal Price × (PPP Factor_reference / PPP Factor_country)
Affordability Index: Expresses prices as percentage of income.
Affordability = Price / (GNI per capita / 12)
Quality Adjustment: Accounts for differences in service quality (speed, coverage, reliability).
Case Study: African Mobile Benchmark Results
| Country | Basket Price (USD) | PPP-Adjusted (USD) | Affordability (% GNI) | Rank |
|---|---|---|---|---|
| Kenya | 4.20 | 8.40 | 2.4% | 1 |
| Ghana | 5.80 | 9.70 | 2.9% | 2 |
| Nigeria | 6.50 | 14.30 | 3.5% | 3 |
| Senegal | 8.20 | 15.80 | 6.1% | 4 |
| Ivory Coast | 7.90 | 13.20 | 3.8% | 5 |
The analysis revealed that whilst Nigeria had lower nominal prices than Senegal, affordability (relative to income) was worse due to lower GDP per capita.
Step Five: Interpretation and Recommendations
Benchmark results require careful interpretation considering:
Structural Factors: Differences in market structure, regulation, and cost drivers that explain performance gaps.
Actionable Insights: Specific recommendations for closing performance gaps or maintaining advantages.
Limitations: Caveats around data quality, comparability, and generalisability.
Applications in TMT
Regulatory Benchmarking
Regulators use benchmarking extensively for:
Tariff Regulation: Setting price caps or assessing reasonableness of regulated tariffs.
| Application | Methodology | Example |
|---|---|---|
| Interconnection rates | LRIC + benchmark validation | BEREC mobile termination benchmarks |
| Roaming charges | Price caps based on benchmarks | EU roaming regulation |
| Universal service | Cost benchmarks for subsidy calculation | Rural broadband programmes |
Performance Monitoring: Tracking market outcomes against policy objectives.
| Metric | Benchmark Source | Regulatory Use |
|---|---|---|
| Broadband speeds | Ookla, SamKnows | Quality of service monitoring |
| Coverage | Operator reports | Licence compliance |
| Prices | ITU, OECD | Affordability assessment |
Case Study: BEREC Termination Rate Benchmark
The Body of European Regulators for Electronic Communications publishes semi-annual benchmarks of mobile and fixed termination rates across EU member states [6]. These benchmarks:
- Inform national regulatory decisions
- Identify outliers requiring investigation
- Track convergence toward efficient cost levels
Strategic Benchmarking
Companies use benchmarking for:
Competitive Positioning: Understanding relative performance versus competitors.
| Metric | Benchmark Question |
|---|---|
| ARPU | Are we capturing fair share of customer value? |
| Churn | Is our retention competitive? |
| NPS | How does customer satisfaction compare? |
| EBITDA margin | Is our cost structure efficient? |
Best Practice Identification: Learning from superior performers.
Case Study: Operational Efficiency Benchmark
EXXING benchmarked operational efficiency for a Middle Eastern operator:
| Metric | Client | Peer Median | Best-in-Class | Gap |
|---|---|---|---|---|
| Subscribers per employee | 850 | 1,200 | 2,100 | -29% |
| Network OPEX per subscriber | $18 | $14 | $9 | +29% |
| Customer acquisition cost | $45 | $38 | $25 | +18% |
| EBITDA margin | 38% | 42% | 52% | -4pp |
The benchmark identified specific improvement opportunities in network operations and customer acquisition efficiency.
Investment Benchmarking
Investors use benchmarking for:
Valuation: Comparable company analysis for valuation multiples.
| Multiple | Application |
|---|---|
| EV/EBITDA | Primary valuation metric for telecoms |
| EV/Subscriber | Useful for growth companies |
| P/E | Less common due to capital intensity |
Due Diligence: Validating management projections against peer performance.
Portfolio Monitoring: Tracking portfolio company performance versus benchmarks.
Advanced Techniques
Data Envelopment Analysis (DEA)
DEA identifies efficient frontiers and measures relative efficiency of decision-making units [3].
Application: Benchmarking operational efficiency across operators, controlling for multiple inputs and outputs simultaneously.
Advantages: Handles multiple dimensions without requiring functional form assumptions.
Limitations: Sensitive to outliers, requires careful input/output selection.
Regression-Based Benchmarking
Regression analysis controls for structural differences when comparing across markets.
Application: Estimating expected performance given market characteristics, then comparing actual to expected.
Model Example:
Price = α + β₁(GDP per capita) + β₂(Competition index) + β₃(Population density) + ε
Residuals identify markets with prices above or below expectations given structural characteristics.
Dynamic Benchmarking
Time series benchmarking tracks performance evolution and convergence.
Application: Assessing whether performance gaps are closing or widening over time.
Metrics: Convergence rate, trend direction, volatility.
Limitations and Best Practices
Common Pitfalls
| Pitfall | Description | Mitigation |
|---|---|---|
| Inappropriate peers | Comparing non-comparable entities | Rigorous peer selection criteria |
| Data inconsistency | Different definitions across sources | Standardisation protocols |
| Context ignorance | Ignoring structural differences | Adjustment methodologies |
| Static analysis | Point-in-time snapshot only | Trend analysis |
| Spurious precision | Over-interpreting small differences | Confidence intervals |
Best Practices
Transparency: Document methodology, data sources, and assumptions.
Consistency: Apply consistent methodology across peers and time periods.
Triangulation: Use multiple data sources and methodologies to validate findings.
Context: Interpret results considering structural and regulatory context.
Actionability: Focus on insights that inform decisions.
Conclusion
International benchmarking provides a powerful framework for performance assessment, regulatory analysis, and strategic decision-making in TMT sectors. Rigorous application requires:
Methodological Discipline: Structured approach to scope definition, peer selection, data collection, and analysis.
Technical Expertise: Statistical techniques for adjustment and interpretation.
Sector Knowledge: Understanding of TMT-specific factors affecting comparability.
Practical Judgement: Balancing analytical rigour with actionable insights.
EXXING combines these capabilities across regulatory, strategic, and investment benchmarking engagements, delivering insights that inform decisions and drive performance improvement.
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References
[1] Camp, R.C. (1989). Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance. ASQC Quality Press.
[2] Porter, M.E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press.
[3] Charnes, A., Cooper, W.W., & Rhodes, E. (1978). "Measuring the Efficiency of Decision Making Units." European Journal of Operational Research, 2(6), 429-444.
[4] Shleifer, A. (1985). "A Theory of Yardstick Competition." RAND Journal of Economics, 16(3), 319-327.
[5] ITU (2023). ICT Price Baskets Methodology. International Telecommunication Union.
[6] BEREC (2024). Termination Rates Benchmark Report. Body of European Regulators for Electronic Communications.
