Why post-paid ARPU is the other key wireless indicator



Post-paid ARPU

In the last part of this series, we learned about post-paid churn. Now, we’ll talk about another important wireless indicator—post-paid ARPU (average revenue per user). The ARPU metric helps us understand the stable revenue stream from a wireless telecom company’s post-paid users. Specifically, for companies with low churn rates, the revenue from post-paid users becomes more predictable.

We’ll look at some of the factors that impacted a few wireless telecom companies’ ARPU in 3Q14. This will help you understand the metrics.

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Different measures of ARPU

As we mentioned earlier in this series, some wireless telecom companies don’t directly report ARPU. Verizon (VZ) reports ARPA (average revenue per account). AT&T (T) and T-Mobile (TMUS) report post-paid phone-only ARPU. Only Sprint (S) gives post-paid ARPU individually. All of the other metrics can help you understand sequential changes in individual companies’ per-user revenue. In the above graph, you can compare Verizon and AT&T’s estimated post-paid ARPU.

Large US telecom companies’ ARPU in 3Q14

As you can see from the above graph, during 3Q14, Verizon’s ARPU increased by 0.2% over the quarter. The growth in Verizon’s ARPU was driven by an ~1% increase in the proportion of smartphones in the postpaid base over the quarter. To learn more, please read What’s driving Verizon’s increase in average revenue per account?

AT&T witnessed a slightly higher increase of 0.8% in ARPU over the quarter. According to management, AT&T’s ARPU increased because customers opted for higher usage data plans. By the end of the quarter, 50% of its customers were using usage plans that were 10 gigabytes, or GB, or higher. Also, like Verizon, the penetration of smartphones in AT&T’s post-paid subscriber base also increased during the quarter. Earlier in this series, we mentioned that smartphones—like Apple’s (AAPL) iPhone—tend to consume more data.


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