India sets date for MVNO rules (The Telegraph)
New Delhi, March 7: The government will announce detailed guidelines for mobile virtual network services by mid-March.
See source article.Category : Mobinomics
Our POV: How to estimate AT&T Prepaid Subscribers, ARPU, and Churn
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
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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
Analyst predicts wireless price war, says industry is “collapsing”
Where would the wireless industry be without a little doom and gloom? Craig Moffett, an analyst with Sanford C. Bernstein & Co., said that if Tier 1 carriers miss their subscriber growth numbers as his firm expects, that they will resort to “aggressive price action,” i.e. a price war. “This industry is collapsing,” Moffett said in an interview with The New York Times. “The whole wireless business is grinding to a halt.” Moffett noted that the fourth quarter was the lowest subscriber growth rate for the U.S. wireless industry ever. Article
See source article.Clearwire will launch at least eight markets in 2009
During its fourth quarter 2008 earnings call today, Clearwire CEO Ben Wolff remained guarded about the exact number of markets the WiMAX provider will launch this year, but rattled off a list of at least eight markets where he said he expects the Clear-branded service will make its debut. Those markets include Las Vegas, Atlanta, Chicago, Philadelphia and Dallas/Ft. Worth. In addition, the company will convert existing pre-WiMAX markets in Seattle, Honolulu and Charlotte to mobile WiMAX and expand the coverage area in Baltimore, which is a Sprint Xohm market that will be converted to Clear.
The company also reported consolidated revenue of $20.5 million. Average revenue per user was up 10 percent to $39.70, up from $36.09 in fourth quarter of 2007. The number of VoIP customers also doubled from 10 percent in in the year-ago quarter to 20 percent in the fourth quarter of 2009. The company added 5,000 net new subscribers for a total subscriber base of 475,000. Churn was 2.8 percent, up from 2.4 percent in the prior year’s quarter.
Here’s a breakdown of the other key points from the announcement:
Markets: By the end of 2010, Wolff said that the Clearwire network will cover 120 million covered POPs and that will include markets such as New York, Boston, Washington, D.C., Houston and San Francisco. However, he also added that the company does not need to expand to 100 markets for it to succeed. Nationwide roaming is not a requirement for success, he said, adding that the company will launch a dual-mode WiMAX/CDMA 1xEVDO modem this summer that will let customers roam on Sprint’s 3G network when out of the Clearwire service area.
Devices: Wolff talked about a “personal” hotspot device that will launch at the end of the month that will combine WiMAX and WiFi and he said that there will be at least 100 mobile WiMAX devices–including laptops, netbooks, handhelds and USB modems available to customers by year-end.
MSOs and other resellers: Expect the cable companies and Sprint to begin selling WiMAX services in the second half of the year. Both are collaborating with Clearwire on product development.
Backhaul: The company says that 70 percent of the Las Vegas and Atlanta markets will use microwave technology for backhaul because it is much cheaper than using terrestrial backhaul.
Cash: Wolff says the company is managing and conserving its cash so it can go until 2011 without additional funding. The company expects to spend between $1.5 billion and $1.9 billion this year.
For more:
- See this press release
Related articles:
Clearwire investors gain larger stake in company
The pros and cons of Clearwire
New Clearwire announces ‘Clear’ brand
Intel: Clearwire has sufficient capital
Report: RadioShack to begin selling Verizon today
RadioShack will begin selling certain Verizon Wireless handsets in some of its stores beginning today, according to the blog Boy Genius Report.
The report shows screenshots of RadioShack’s billing system with prices for handsets such as Research In Motion’s BlackBerry Storm, LG’s Dare and enV2 and the Samsung Knack. The report said the handsets would not be sold at all RadioShack stores, at least initially.
The rumor first appeared earlier this week on the website phonenews.com. RadioShack and Verizon ended their relationship in the summer of 2005 and RadioShack revamped its wireless retail business. The company has continued to sell phones through AT&T Mobility and Sprint Nextel. The move would make sense in the wake of the liquidation of Circuit City (and the elimination of Verizon jobs at Circuit City stores), and as RadioShack looks to increase its mobile retail market share. RadioShack has recently been revamping its displays to compete directly with Best Buy and has opened three stores in the Dallas area that are focused on selling mobile devices, taking a page from Best Buy’s free-standing mobile stores.
When contacted earlier this week, a Verizon spokeswoman declined to comment on the development.
For more:
- see this post
- see this video of RadioShack’s new stores
Related Articles:
Rumor Mill: RadioShack to begin selling Verizon phones
Is RadioShack trying to mimic Best Buy Mobile?
RadioShack retools wireless displays to compete with Best Buy
Metro PCS partners with Best Buy
Radioshack, Trumpet launch prepaid mobile money
Azteca Mobile calls it quits (The Kansas City Star)
Azteca Mobile, an Overland Park-based wireless company that used the Sprint Nextel network, is out of business.
See source article.Is T-Mobile USA Entering The $50-A-Month Voice Plan War? (paidContent.org via Yahoo! Finance)
T-Mobile USA launched a trial in San Francisco two weeks ago that allowed customers to sign-up for unlimited voice for $50 a month, but now there’s evidence that it is quickly expanding the offer to more customers nationwide.
See source article.Virgin Mobile reports $4.4M Q4 loss, but boosts revenue
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