Telecom operators worldwide now lose $40 billion a year to fraud, which is two per cent of the US$2trillion that global telecom services generate annually.
This is contained in the Heavy Reading Service Provider IT Insider Report dubbed “Bigger than Disney: Telecom Fraud tops US$40 billion a Year.”
The report, based on the study of 11 telcos and their products offerings, takes a close look at the telecom services industry's theft problem, and identifies the potential solutions available to network operators to keep losses from service theft under control.
Author of the report and Senior Analyst of Heavy Reading, Susan McNeice was quoted as saying "telecom fraud is an ever-present drain on operator profitability, and operators and their vendor partners have long tried to limit theft but to no avail."
She said, "Despite their best efforts and recent improvements in ways to fight fraud, the bill for fraud is growing and now stands at $40 billion a year, which is equal to the annual revenue of the Walt Disney Company."
But what Heavy Reading reported this year is an improvement compared to US$58 billion loss reported by UK-based Juniper Research last year.
In what sounded like a doom statement, McNeice said the outlook for reducing loss from telecom service theft is not promising, adding that cost-cutting is likely to increase vulnerability to some forms of theft.
She said the rapid growth of mobile services, including mobile payment offerings, will no doubt spark new attempts at stealing.
Meanwhile telcos in Ghana, for instance, are busily offering mobile payment services, with one almost ready to launch a swipe card for purchase of airtime and for shopping as well.
The telcos in Ghana are also undertaking serious austerity measures, cutting cost at every possible level, but McNeice says those measures are rather likely to increase fraud.
“Networks have actually become less secure,” McNeice said.
In 2010, SIM box fraud alone cost telecom operators some US$150 million worldwide and it cost Ghana some US$5.8million between March and June of the same year, according to the Ministry of Communications.
In 2011, MTN Ghana sad it lost US$9million to SIM box fraud between March and October, and government lost a tax equivalent of US$4million; and Airtel also said it lost up to US$500,000 a month to same last year.
But McNeice said, other than SIM box fraud, classic subscription fraud and private branch exchange (PBX) hacking techniques for stealing telecom services remain at the top of the list of telecom frauds, adding that fraudsters are getting more sophisticated, and for every system and process the operators nail down, new forms of the crime emerge.
She noted that telecom managers and their vendors point to decreasing vigilance as one of the root causes, adding “this is compounded by the increasing number and complexity of networks, devices and service types in the market.”
McNeice noted that the telcos agreed on one thing; that it is time to re-commit to fraud prevention and redouble efforts.
The Author said, to help tame the monster, operators and vendors are now expanding their view of fraud. They are approaching the subject broadly to understand the full risk and attack it from the point of both probability and total impact, and classic fraud management systems are being augmented.