uploads///Telecom T Mobile Q Postpaid ARPU

Why T-Mobile Anticipates Stable ARPU Going Forward

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Apr. 11 2017, Updated 6:36 a.m. ET

T-Mobile’s average revenue per user

In this part of the series, we’ll look at the postpaid phone ARPU (average revenue per user) for T-Mobile (TMUS). The inclusion of wireless service fees and taxes at existing price points could dilute its ARPU.

At the Citi European & Emerging Markets Telecoms Conference on March 21, 2017, Nils Paellmann, T-Mobile’s head of Investor Relations, spoke about the trend in T-Mobile’s ARPU. He said, “What we have set on ARPU generally is that we expect a generally stable ARPU going forward. So for us, I think the main goal is still to gain share, continue to gain share.”

He added, “Stable ARPU plus continued share gain results in strong revenue growth, results in strong profitability growth, strong free cash flow growth. That has been our model. And, yes, so that’s what I would say.”

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In 4Q16, T-Mobile’s branded postpaid phone ARPU rose ~0.70% YoY (year-over-year) to reach $48.37. The rise resulted from upgrades to T-Mobile One and the MVNO (mobile virtual network operator) transaction. The company noted that in 4Q16, its postpaid phone ARPU rose ~2.0% YoY after setting aside the impact of some non-recurring items.

T-Mobile’s average billings per user

In 4Q16, T-Mobile’s postpaid ABPU (average billing per user) fell ~1.0% YoY, from $63.74 in 4Q15 to $63.08 in 4Q16. The fall was mostly due to lower EIP (equipment installment plan) billings as well as dilution from the increased penetration of mobile broadband devices. But the fall was also partially offset by an increase in lease revenues in 4Q16.

ABPU encompasses service revenues and installment payments made by postpaid customers. These installment billings are categorized as equipment revenues.

Installment billings and service revenues provide stable revenue sources for major wireless carriers such as T-Mobile, Sprint (S), Verizon (VZ), and AT&T (T). T-Mobile’s JUMP! installment plan is similar to Verizon’s Device Payment Plan and the AT&T Next installment plan.

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