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Understanding the Key Trends in Sprint’s Average Billing per User

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Sprint’s postpaid phone ABPU

In this part of our series, we’ll take a look at Sprint’s (S) postpaid phone ABPU (average billing per user). Sprint’s postpaid phone ABPU declined YoY (year-over-year) during fiscal 3Q17 (ended December 2017). Its ABPU fell ~4.5%, from $71.77 in fiscal 3Q16 to $68.54 in fiscal 3Q17.

According to Sprint, the main reason for this YoY decline was lower insurance revenues, which boosted its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization). If normalized for this change and hurricane-related credits, Sprint’s postpaid phone ABPU would have fallen less than 1.0% YoY.

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ABPU includes service revenues and installment payments made by postpaid subscribers. These installment billings are a part of equipment revenues. Remember, in the case of wireless service providers such as Sprint, AT&T (T), T-Mobile (TMUS), and Verizon Communications (VZ), a stable source of income is generated via installment billings as well as service revenues.

Sprint’s postpaid ARPU

Now we’ll take a look at the postpaid ARPU (average revenue per user) for Sprint. ARPU represents unit service revenues of wireless carriers. In fiscal 3Q17, Sprint’s postpaid ARPU fell ~9.2% YoY to reach $45.13.

Sprint’s postpaid ARPU has been declining sequentially over the last few quarters. This is adversely impacting Sprint’s postpaid service revenues. According to the company, about 79% of postpaid phone customers are now on an unsubsidized service plan, compared with 71% in fiscal 3Q16. As the penetration of unsubsidized plan increases, it will likely help the mobile carrier to improve Sprint’s postpaid ARPU decline.

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