e other increases return on investment. Revenue Expenses Total capital Figure A2.8 Return on capital employed Understanding Changing Telecommunications - Building a Successful Telecom Business Operating profit Revenues Operating profit Total assets Revenues Total assets Figure A2.9 Du Pont diagram Figure A2.9 shows this formula in a graphical manner (Du Pont diagram). Return on Sales (ROS) Profit shown as a percentage of revenue/sales. Operating profit * 100 ROS = Revenue SENSITIVITY ANALYSIS As a basis for decision making a sensitivity analysis is a supporting tool when relevant. You change the values for estimated expenses and revenues, for example by changing customer base development, tariffs and operation cost. Then the impact on cash flow or NPV is examined. Appendix 3 Development Tracks INTRODUCTION Paradigm shift and migration are some typical subjects of this book. Many actors are already involved in such process of change, moving from different starting points towards a new network offering multimedia services as standard feature. The change can be fast or soft. A soft stepwise migration is typical for actors with considerable network assets in the network. The assets correspond roughly to the capital employed, which is part of the ROCE equation. When using ROCE as a tool, it is important to utilize the existing resources, such as copper, fibre, RBS and sites, switching and processing capabilities, in the best possible way, when converging the networks towards a target network shape. This gives the best return on capital employed. For incumbent telecom operators, the migration process for the telephony network is the most crucial. This is normally the biggest operated network where the operator has made the largest investments. Mobile operators with a large 2G network have a similar situation. Phase 4 Multi-service Wired multi-access Wireless infrastructure Migration to 3G 'All IP' Phase 3 voice & data IP & MPLS Packet data & Phase 2 integration circuit voice Voice trunking 2G with Internet over ATM Pha