Tag Archive for "ARPU" tag

Our POV: How to estimate AT&T Prepaid Subscribers, ARPU, and Churn

March 10th, 2009 by david | 2 comments

As an analyst in the wireless industry, I was often asked to compare KPIs (Key Performance Indices - subscriber counts, ARPU, Churn, etc.) of various carriers. Unfortunately, most carriers earnings reports do not provide breakout of KPIs for their prepaid and/or reseller (aka. MVNO) businesses. Unless they are from a pure-play prepaid provider like Virgin Mobile (now less true with their acquisition of Helio) or Tracfone, prepaid KPIs are not easy to come.

In this article, I will share the method I use to estimate prepaid subscriber count, prepaid ARPU, and prepaid churn for AT&t using its latest 4Q 2008 earnings report.

First, you will have to be fairly familiar with AT&T’s Statement of Segment Income — GAAP for the Wireless segment [master.xls]. Under the tab, Wireless Segment, AT&T provides total Subscriber count, Net adds, Postpaid sub count, churn and its ARPU. This is great especially AT&T is doing quite well in its postpaid business. But if you want to get to Prepaid/Reseller ARPU and churn, you’ll have to do some math. Let’s calculate AT&T’s Prepaid + Reseller :

Subscribers (row 40, 41)
ARPU (row 59, 60)
Churn (row 51, 52)

You can download the work file here in Excel format (see the red Wireless Segment tab).

Prepaid Subscribers

All you need is ONE reasonable assumption, the number of Reseller subscriber in 4Q 2008 to get to the estimated prepaid subscriber count. Fortunately, we can make one fairly easily since most of their reseller subscribers come from the Tracfone, the largest MVNO in the US. As of 3Q 2008, Tracfone reported 10.449M subs. If in 4Q 2008, Tracfone added the same number of subs in as in 4Q 2007, then 10.499M + 711k = 11.16M (see cell I41). AT&T has 77M total subs, 60M postpaid subs, and 11.16M reseller subs (est). So AT&T prepaid subscriber count is 77M - 60M - 11.16M = 5.7M. We will use this estimate for the rest of the calculation.

Prepaid/Reseller Churn

To estimate the churn, you first calculate the number of disconnects for total subscribers and postpaid subscribers using the reported churn rate (see row 53-55). As you can see, it looks like the disconnects for Prepaid + Reseller segement would have to be 1.479M for AT&T to have a consolidated total churn of 1.6%. Hence, the Prepaid + Reseller churn is about 3.1%. [Gut check: Tracfone's last reported churn rate was 3.6% in 4Q 2007 and 3.8% in 3Q 2008.] If AT&T’s composite Prepaid + Reseller churn is 3.1% and the Reseller churn (Tracfone’s churn) is ~3.8%, the true AT&T Prepaid churn rate is likely lower than 3%. This would be quite good for US Prepaid providers.

Prepaid + Reseller ARPU

Estimating ARPU can be done in a similar fashion. The only thing you need to do is read the Investor Briefing (the pdf file they released). It states that the Postpaid ARPU was $59.59 in 4Q 2008. With that plus the total service revenue, you can back out the postpaid only service revenue which you can use to calculate the remainder of the service revenue for the prepaid and reseller segments. The Prepaid + Reseller service revenue was 955M so using the Prepaid + Reseller subscriber count for 3Q and 4Q we calculated earlier, you can estimate the ARPU. It turns out the Prepaid + Reseller ARPU was about $19.27. The true Prepaid-only ARPU for AT&T is likely to be much higher. Tracfone (reseller) reports ARPU of $11 in 3Q 2008. Don’t forget that this is at the retail level. As a wholesaler (AT&T in this case), the ARPU AT&T takes is likely in the $4-6 range depending on the price of the wholesale minute which can range from $0.03-0.08 per minute based on a Tracfone average of 78 MOU (minutes of use).

I hope this has been helpful in estimating AT&T’s prepaid KPIs . All of these estimates are done using assumptions and should be use for “back-of-the-envelope” calculations only.

Our POV: Economy and CPGA Power Virgin Mobile

March 9th, 2009 by arif | 0

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Virgin Mobile’s recent earning report and the associated announcements point towards a renewed future for prepaid and MVNO wireless programs in the U.S.

While many key components contribute towards the recent surge in this wireless segment, the current economic conditions certainly play an important role on several fronts.

Consider the recent flat monthly prepaid or pay as you go rate products announced by Virgin, Boost and others. But many existing prepaid customers, who make up the majority of Virgin subscribers, spend less than half of the going flat rate plans recently announced for their wireless voice and data needs. Therefore, there is little chance in this economic climate that these subscribers would upgrade their plans and double their monthly spend. Perhaps the silver lining is that some of the lower end of the postpaid subscribers would be encouraged to sign for plans that offer ‘unlimited’ minutes for a flat monthly rate.

Another economic climate contributing factor could be lower churn specifically from ‘switchers,’ who may think twice about an incremental spend on a new handset. Witness Virgin’s quarterly (period ending December 31, 2008) churn drop to 4.8% from 5.1%. The annual churn rate for 2008 compared to 2007, however, rose to 5.2% from 4.9%.

While much is being made about Virgin’s recent quarterly financial performance, especially about the growth in service revenue, the company should also be given credit for dramatically reducing its CPGA (Cost Per Gross Addition). While quarterly and year-over-year gross addition were roughly the same, the company reduced its quarterly CPGA to $101.93 from $120.68 for the same quarter in 2007 or improving a key metric for prepaid MVNOs by more than $17 million.

And while monthly ARPU (Average Revenue Per User) in 2008 increased by $0.78 over the same quarter in 2007, there was a corresponding increase in CCPU (Cash Cost Per User) of $2.22. For the full year, while CCPU was down, so was ARPU.

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Three Months Ended Year Ended

December 31, December 31,

——————– ——————–

2008 2007 2008 2007

——— ——— ——— ———

(Unaudited) (Unaudited)

Gross additions 960,421 957,541 3,305,857 3,384,460

Churn 4.8% 5.1% 5.2% 4.9%

Net customer additions 216,005 209,669 119,237 511,796

End-of-period customers 5,380,310 5,085,886 5,380,310 5,085,886

ARPU $ 21.14 $ 20.36 $ 20.30 $ 21.24

CCPU $ 13.99 $ 11.77 $ 12.74 $ 13.05

CPGA $ 101.93 $ 120.68 $ 108.68 $ 111.66

Free cash flow $ 25,720 $ 11,206

Unlevered cash flow $ 57,776 $ 62,657

Virgin Mobile reports $4.4M Q4 loss, but boosts revenue

March 3rd, 2009 by admin | 0

Virgin Mobile USA reported a net loss in the fourth quarter of 2008 of $4.4 million, compared to a net loss of $14.7 million in the year-ago quarter. However, the prepaid MVNO had a positive net income of $7.9 million for the full year, compared to $4.2 million for 2007, and increased its subscriber base for the year by 6 percent.

Revenue: Virgin Mobile had a net service revenue of $326.7 million in the quarter, a 10 percent increase compared to the year-ago quarter. For all of 2008, Virgin Mobile’s net service revenue was $1.2 billion, consistent with net service revenue in 2007.

Subscriber additions: The carrier had 216,000 net additions in the quarter, up 3 percent from the year-ago period. Virgin also reported that it ended 2008 with 5.38 million total subscribers, compared to 5.1 million at the end of 2007. The company said it had more than 3.3 million gross additions during the year.

Churn: The carrier said churn for the fourth quarter was 4.8 percent, down from 5.5 percent in the third quarter of 2008 and 5.1 percent in the year-ago period.

ARPU: Virgin Mobile reported ARPU of $21.14, a 4 percent increase from $20.36 in the year-ago quarter and a 3 percent bump from the third quarter of 2008. ARPU for the full year was $20.30, a 4 percent decline compared to $21.24 in 2007. The company said ARPU in the fourth quarter benefited from the launch of its revised hybrid plans in the second quarter of 2008.

For more:
- see this release

Related Articles:
Virgin Mobile USA cuts 10 percent of workforce
Virgin Mobile launch of Helio Ocean 2 imminent
Virgin Mobile USA has 216K net adds in Q4
Virgin Mobile USA Q3 earnings beat expectations

See source article.

T-Mobile USA revenue jumps despite weak subscriber growth

February 27th, 2009 by admin | 0

T-Mobile USA reported a boost in net income and revenue despite a significant drop in subscriber additions. The carrier, a unit of Deutsche Telekom, reported net income for the fourth quarter of 2008 of $483 million, up from $383 million in the year-ago quarter and up from $442 million in the third quarter of 2008.

Revenue: The carrier, the nation’s fourth largest, has service revenues of $4.90 billion in the quarter, up from $4.37 billion in the fourth quarter of 2007. Total revenues were $5.72 billion in the fourth quarter of 2008, up from $5.51 billion in the third quarter of 2008 and $5.07 billion in the year-ago period. T-Mobile said that higher total revenues were driven in part by a jump in demand for new devices like the T-Mobile G1 as well as higher contract revenues stemming from T-Mobile’s February 2008 acquisition of SunCom Wireless.

Net adds: T-Mobile reported 621,000 net new subscriber additions in the quarter, down from 670,000 in the third quarter of 2008 and 951,000 in the fourth quarter of 2007. The number was the lowest quarterly net subscriber additions since the second quarter of 2006. T-Mobile ended the year with 32.8 million subscribers. The carrier added 4.07 million net new customers in 2008, compared to 3.64 million added in all of 2007. This past year’s total included 2.94 million organic net new customers and 1.13 million that were acquired as part the SunCom acquisition.

Churn: Contract, or postpaid, churn for the fourth quarter was 2.4 percent, the same as the third quarter of 2008 and up from 1.8 percent in the fourth quarter of 2007. Blended churn, including both postpaid and prepaid subscribers, was 3.3 percent in the quarter and up from 3 percent in the third quarter of 2008 and 2.8 percent in the year-ago period. The carrier said its contract churn continues to be affected by the end of two-year contracts, which were first introduced in April 2006, and increased competition.

ARPU: Contract ARPU at the carrier was $54 in the quarter, down from $55 in the third quarter of 2008 and $56 in the fourth quarter of 2007. Blended ARPU was $50 in the fourth quarter of 2008, down from $52 in both the the third quarter of 2008 and the year-ago period.

Data revenue: Data services revenue was $905 million in the quarter, representing 18.5 percent of blended ARPU, up from 15.8 percent of blended ARPU in the fourth quarter of 2007. Data services revenue jumped 31 percent in the fourth quarter of 2008 as compared to the year-ago quarter.

For more:
-see this release
- click here to see all the carrier metrics

Related Articles:
T-Mobile USA has 670K net adds in Q3
T-Mobile adds 668,000 subs, lowest number since 2006
T-Mobile will have 3G in 27 markets by year’s end
With little fanfare, T-Mobile launches 3G in New York
T-Mobile launches UMTS in Las Vegas

See source article.

MetroPCS boosts revenue, but ARPU declines

February 26th, 2009 by admin | 0

MetroPCS reported a bump in revenue and reported a profit for the fourth quarter and the full year, but saw its ARPU decline. The flat-rate carrier posted total revenue for the quarter of $724 million, up 22 percent from $591 million in the year-ago quarter. The carrier also had net income of $15 million in the quarter, compared to a $47 million loss in the fourth quarter of 2007.

Net additions: The carrier had a little under 520,000 net subscriber additions in the quarter, a 74 percent year-over-year increase. For the year, MetroPCS had around 1.4 million consolidated net additions, and ended 2008 with a little under 5.4 million total subscribers.

Churn: Churn in the fourth quarter increased to 5.1 percent, up from 4.8 percent in the fourth quarter of 2008. For the full year, the churn rate was 4.7 percent, constant from 2007.

ARPU: ARPU in the quarter was $40.52, down from $42.83 in the year-ago quarter. ARPU was also down for the full year, down to $41.39 compared to $43.31 for all of 2007.

Network additions: In November, the carrier launched its nationwide calling plan, which it says provides service in 300 cities coast to coast. At the end of September, MetroPCS and its rival Leap Wireless, settled all of their outstanding litigation and inked a roaming deal that covered both networks’ present and future markets. MetroPCS also launched a service to flash compatible CDMA handsets over to its network.

For more:
- see this article
- see this release

Related Articles:
MetroPCS had 520K net adds in Q4
MetroPCS launches nationwide plan
MetroPCS adds 249K subs in Q3
Leap, MetroPCS announce roaming deal
MetroPCS will flash existing CDMA handsets

See source article.

iPhone in China: China Mobile or China Unicom? (telecomasia.net)

February 25th, 2009 by admin | 0

Hong Kong cellco SmarTone announced a 68% fall in profit for the second half of 2008 yesterday as it forecast a further decline in business this year.

See source article.

Virgin Media shares up on lower customer turnover (AP via Yahoo! Finance)

February 25th, 2009 by admin | 0

Shares of the cable and telecommunications company Virgin Media Inc. made gains Wednesday, helped by fourth-quarter results that showed lower customer turnover.

See source article.

Research and Markets: 1Q09 China Mobile Operator Forecast, 2008 – 2013: China to Surpass 1 Billion Mobile Subscribers … (Centre Daily Times)

February 15th, 2009 by admin | 0

Research and Markets ( http://www.researchandmarkets.com/research/7430ec/1q09_china_mobile ) has announced the addition of IE Market Research Corp.’s new report “1Q09 China Mobile Operator Forecast, 2008 - 2013: China to Surpass 1 Billion Mobile Subscribers In 2013″ to their offering.

See source article.

Ovum Research: Wireless for low ARPU users (BusinessWorld Online)

February 10th, 2009 by admin | 0

Ensuring wireless coverage and profitably serving low-income users, who spend less than $3 per month, will be one of the biggest challenges for the mobile industry in emerging markets going forward.

See source article.

WiMAX deployments hit by economic downturn (CIOL)

February 5th, 2009 by admin | 0

MONTREAL, CANADA: BWA/WiMAX subscribers worldwide reached 2.68 million in Q3 2008, a more modest 13 percent growth over the first quarter and a 91 percent increase over Q3 2007, according to the 6th issue of the WiMAXCounts Quarterly Report from Maravedis.

See source article.