ARPU: the leading indicator for telecom operators
ARPU (Average Revenue Per User) has always been the leading indicator of telecom operators’ health. It represents the average revenue per customer over a given perimeter (mobile offers, roaming, fixed offers, all activities combined, etc.) and over a given period (generally one year, but it can be reported monthly to manage it more accurately).
The ARPU is therefore calculated as follows: ARPU = (total revenue over 12 months) / (number of customers over 12 months).
Although not all French operators have in the past applied the same criteria to define what a customer is (sometimes roaming customers and their revenues are analysed in the same way as a resident customer) or what they mean by “income” (not taking into account the promotion given to the customer etc.), all used ARPU indicator in their annual financial reports and analysts pay the greatest attention to it. Recently, IFRS 15 has been introduced to standardize this data in order to allow all operators to display indicators that are comparable to each other.
DECREASING STEADILING : ARPU has been falling since 2008
According to French regulator ARCEP’s annual observatory (available here), ARPU has been in constant decline since 2005. If we look more closely, some increases and decreases are accentuated by significant events in the sector:
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The democratization of data with 3G, 3G+ and then 4G offers. While in the early 2000s ARPU increased with WAP offers, which were the beginning of mobile content consumption, it was the 3G offers launched in 2004 that enabled operators to reach the peak of ARPU. Then the democratization of data drives prices down until the explosion of Smartphones in 2010 combined with the arrival of 4G, which will eventually trivialize data. In contrast to the enhancement of data, voice has been democratized and then trivialized. Indeed, almost all packages began to include unlimited call time in the 2010’s, only prepaid offers continued to enhance the value of voice.
- The arrival of the 4th operator. As a natural consequence of the end of an oligopoly, price competition was the major instrument for Free to win subscribers and alignment was a matter of survival for other operators. The result is clear, ARPU has been reduced by a third since 2012, and more broadly, it will have been halved in less than 15 years.
Evolution of the average monthly invoice per customer of French mobile operators since 2000
THE IMPACT: Mobile Voice Services increase annual ARPU from 30 to 40 cents !
Based on empirical working hypotheses validated with our partners, we are able to affirm that the implementation of Mobile Voice Services increases the annual ARPU by 30 to 40 cents for the operator!
The hypotheses we make are as follows :
- 7% on average of customers consume Mobile Voice Services (see our article on “Who are these people who never do data?”) which represents about 200,000 calls per month
- The tariff is based on the maximum regulatory threshold authorised by the regulator for this type of service, with of course a free tariff information message of at least 10 seconds
- 6 Mobile Voice Services are delivered to operators with all the optimizations offered by The Mobile Concept
If the operator has a base of 10 million mobile customers, then we can generate 30 to 40 cents of annual ARPU for the operator!
