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.
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.