Growth trend to continue in average billings per user
In the earlier parts of this series, we learned about T-Mobile’s (TMUS) robust postpaid subscriber growth. We also looked at some of the factors that are fueling this growth momentum. Now let’s take a look at T-Mobile’s average billings per user (or ABPU), a measure of postpaid subscribers’ unit contributions. We expect the growth trend in T-Mobile’s ABPU to continue in 2Q15.
Data stash dampened growth of T-Mobile’s ABPU in 1Q15
For the postpaid segment, ABPU includes the monthly unit service revenue and EIP (equipment installment plan) billings of a wireless telecom company’s subscribers. For wireless carriers such as T-Mobile (TMUS), AT&T (T), Verizon (VZ), and Sprint (S), service revenues are stable revenue streams. EIP billings are the recurring contributors to a wireless carrier’s equipment revenue.
T-Mobile’s ABPU from the postpaid segment increased marginally by ~2.4% year-over-year to reach ~$60.94 in 1Q15. The sluggish year-over-year growth was due in large part to a decline in the wireless carrier’s postpaid phone ARPU (average revenue per user).
The ARPU from postpaid phone users decreased 8.0% year-over-year during the quarter. According to T-Mobile, this decline originated from deferred revenue of data stash. In January 2015, the company gave 10GB data stash, or rollover data, to its select customers. T-Mobile will recognize this deferred revenue during 2015.
For a diversified exposure to T-Mobile, you may consider investing in the iShares Russell 3000 ETF (IWV) or the iShares Russell 1000 ETF (IWB). Both ETFs held ~0.05% each in T-Mobile on June 30, 2015.