Implementing Activity-Based Costing in the Telecommunications Sector: A Case Study

Maria Joao Major

doi:10.4172/2167-0919.1000111

Abstract

Profound changes have affected the European telecommunications sector in the last 15 years. With its liberalization at the end of 1990s many telecommunications companies, such as ‘International Telecom’ had to adopt advanced managerial accounting systems that could provide them with detailed and accurate cost accounting information. To this respect Activity-based Costing revealed crucial to aid International Telecom to face fierce competition coming out from the new operators that came into market and to respond to regulatory demands.

Highlights

This paper aims to investigate how the introduction of competition into the EU telecommunications market affected the development of managerial accounting systems in a specific company called ‘International Telecom’1
‘International Telecom’s’ managers felt that their information systems were not appropriate for the new challenges of the telecommunications market, and that more detailed and accurate costing data was needed
This brought several changes: SAP replaced Millennium; special informational systems directed at executives, such as EIS, were introduced; and activity-based costing (ABC) was implemented, amongst other changes

Summary

Introduction

This paper aims to investigate how the introduction of competition into the EU telecommunications market affected the development of managerial accounting systems in a specific company called ‘International Telecom’. Until the liberalisation of the EU telecommunications sector ‘International Telecom’ operated in a monopoly regime This made it a very profitable company. The introduction of competition into the sector in 2000 led to a decrease in ‘International Telecom’s’ turnover, margins, and profits, which pressured it into initiating a full programme of change. This programme of change included: (i) revision of its strategic plan; (ii) adoption of strategic control benchmarks; (iii) implementation of a new career evaluation system; (iv) adoption of EIS – Executive Information Systems to provide senior managers with operational and strategic information; (v) introduction of SAP; and (vi) replacement of ‘International Telecom’s’ previous managerial accounting system by activity-based costing (ABC).

Objectives

Findings

Conclusion