In the last part of this series, we learned how the Next plan is helping AT&T (T) to manage its postpaid churn rate. Now, we will look at the plan’s other attributes that impact the company’s postpaid phone average revenue per user, or ARPUs, as well as equipment revenues. ARPUs are the monthly per user service revenues. Also, the company’s postpaid phone base includes smartphones, feature phones, and wireless home phones.
Telecoms report postpaid ARPUs in different ways. AT&T also reports Wireless ARPUs. Like AT&T, T-Mobile (TMUS) gives postpaid phone-only ARPUs. Verizon (VZ) provides average revenue per account, or ARPA. Only Sprint (S) reports postpaid ARPUs. Please read Why post-paid ARPU is the other key wireless indicator to learn more.
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Next affects AT&T’s equipment revenues
AT&T’s phone-only ARPUs declined throughout the year. The company’s ARPU decreased 11% year-over-year in the fourth quarter and also fell 2% sequentially during the quarter.
Apart from competitive price pressures, one of the main reasons why AT&T’s phone-only ARPUs declined during the year is the adoption of its Next plan. A significant proportion of the company’s postpaid phone subscribers moved from subsidy plans to the Next program during the year. Please read Why we’re seeing a telecom shift from subsidy to installment plans to learn more about these subsidy plans.
However, the overall impact of the Next program to the company’s revenues is positive. As you can see in the above chart, AT&T’s phone-only ARPUs with Next’s monthly installments increased sequentially during the last two quarters of 2014.
AT&T’s ARPUs in the Next program are lower than those in subsidy plans. Nonetheless, the program provides monthly installments paid by customers to purchase a phone during the installment period, which is typically 20–30 months. These installment payments are not included in service revenues or ARPUs and are instead included in equipment revenues.