Capital recycling: a lesson in active management

Capital recycling: a lesson in active management

How can telecom companies ensure that capital investments remain focused on strategically-important projects?

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Capital recycling involves divesting certain non-strategic businesses and infrastructure assets, and setting aside part or all the proceeds for alternative projects. The key challenge is to accurately identify existing high value and poorly performing investments, and understand the potential risks of putting the capital into new ventures, which could fail to deliver expected returns and required cash flows.

According to the respondents to KPMG’s 2015 global survey:

  • A majority review the strategic importance of businesses and assets as part of the annual planning cycle
  • Around half review the continued strategic importance of projects more regularly
  • A few report monthly on capital projects, enabling Head Office to monitor project spend or underspend vs. budget
  • 31% hold quarterly reviews of projects/programs, to assess their strategic alignment and best use of available capital, and consider options including recycling 
  • 69% say underspend of allocated funding is recouped by Head Office for re-allocation to the next most strategic group-wide project. 

Releasing non-strategic capital

Recycling of non-strategic or underperforming businesses and assets is an important source of funding, generating additional money to invest in more strategic areas, or reducing cash outflows.

Controlling the allocation of project underspend

Once capital has been allocated to telecom business units for specific projects, it is important to monitor how it is spent, to ensure it delivers the planned business benefits.

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