We start off by calculating the break-even point for NewCorp:
0 = revenue - costs
0 = price * amount - variable cost * amount - fixed cost
As we are trying to solve for variable “amount”, we need all the other information.
Wait for the interviewee to ask the right questions:
- Assume that in a country of comparable conditions yearly overhead costs of 3.6m € were a reasonable amount.
- Current price of the incumbent provider is 27€/month.
Another cost that we want to consider is the depreciation of our investment in the ADSL equipment. The 180,000 reduces in value over 5 years, so 36,000 per equipment per year, which leaves us with monthly depreciation of 3000 per month per equipment.
A candidate reaching that number (break-event) has proven solid quantitative skills.
You should ask the interviewee, whether this seems a realistic number. If requested, provide information that Poland has around 36m inhabitants.
A tricky detail is that not the number of inhabitants, but rather the number of households is the relevant metric for answering this question. For simplicity assume that the average household in Poland encompasses 3 persons.
Your client is currently the only operator in the market, although others are considering entering the market as well. (Therefore, you are asked to do the analysis!)