According to Wireless Intelligence research, the USA is one of the few countries worldwide where consumers are increasing their spend on mobile, countering the traditional perception that ARPU has been consistently decreasing in recent years. Calum Dewar reports.
Wireless Intelligence derives two separate ARPU measurements for each country/region; connections ARPU, which is calculated by dividing recurring revenues by total connections (ie number of SIM cards), and subscriber ARPU, where recurring revenues are divided by unique subscribers (ie number of people).
In the USA, subscriber ARPU has increased by 9% over the past decade to $69, despite a 15% decline in connections ARPU during the same period. The country ranked among the world’s highest subscriber ARPU markets in Q4 2012, coming in at 12th above Saudi Arabia (15th), Australia (17th), Japan (18th) and Singapore (23rd).
In our recent study, Traditional ARPU distorting consumer mobile spending trends, we described how traditional ARPU based on connections tends to underestimate consumer spend on mobile services, as global subscriber ARPU is double the level of connections ARPU. Connection figures are distorted by the phenomenon of multiple SIM ownership, as consumers in the USA use on average 1.54 SIM cards each.
When dividing mobile revenues by number of connections, ARPU in the USA is showing a continuous quarterly decline, as it is in most regions around the world. The country’s connections ARPU has declined by $8 over the past decade to $45. Interestingly, when calculated based on connections, ARPU in Japan ($50) is higher than that in the US – Japan ranks 7th out of 236 countries while the US comes in 11th. However, as explained above, the situation is reversed when calculating ARPU based on subscribers.
This trend is highlighted by Verizon Wireless, which in Q3 2012 began reporting ARPA (average revenue per account) as opposed to ARPU to reflect the high proportion of shared data plan users in its contract segment. While not directly equivalent to subscriber ARPU, Verizon’s ARPA of $146.80 in Q4 2012 was up 6.6% year-on-year compared to an estimated 4.7% growth for connections ARPU. Last October, the operator stated that “following the recent introduction of the share everything plan and as customers continue to add multiple devices to accounts, Verizon Wireless now reports ARPA instead of ARPU since customers can share data among multiple devices”.
This change in reporting style is indicative of the increase in SIM ownership detailed in our earlier publication, Global mobile penetration — subscribers versus connections. This research explained how the number of SIM cards per subscriber increased by 18% in the US between 2009 and 2011 and will continue to grow over the next five years, mainly due to the effect of mobile broadband device ownership. In developed markets the rapid adoption of mobile broadband devices (eg USB dongles, datacards, laptops and tablets) partly explains the rise in SIM ownership, as increasingly users tend to purchase one or more handsets as well as one or more mobile broadband devices. This situation is exacerbated by operators’ bundled deals and shared data plans, which allow a single data allowance to be shared across multiple devices and SIM cards.
In March this year, AT&T introduced three new Mobile Share packages allowing consumers to add more devices to their accounts, including basic and quick messaging phones for $30 per month per device; laptops, dongles and netbooks for $20 per month per device; and tablets and gaming devices for $10 per month per device. The new packages include unlimited voice and SMS and cost up to $500 per month for 50 GB.
Nevertheless, the revenue generated by data devices such as tablets has been questioned by operators. Dan Hesse, Sprint Nextel’s CEO, claimed that tablets bring less incremental revenue than smartphones but nonetheless “what we like about tablets is that we generally see them as a ‘no-to-very-low’ subsidy device”. In contrast, John Stephens, AT&T’s CFO, claimed that the recent $100 subsidy on tablets helped to drive tablet sales to 400,000 last quarter and is considering subsidies as “a tool that could be real beneficial to help us grow the business from a data-centric device”. Stephens added that in Q4 2012, “the results were positive, not only on the [tablet] sales activity, but on the revenue commitments that we got out of it from a monthly basis”.
In addition, while T-Mobile announced last year that they will stop subsidising devices, Verizon Wireless explained recently that subsidies are part of their success in their internet device category and that they contribute to driving incremental revenues from a usage perspective.
United States of America, ARPU by subscribers versus connections, 2002-12
Source: Wireless Intelligence