What is ARPU?
Average Revenue Per User (ARPU) is a standard measure the Telecom industry uses to show the revenue generated across its customer base. This is also now used by other sectors, such as digital media & content.
This is often also used with average margin per user (AMPU) as another way of measuring the returns across the customer base.
Mobile operators report their consumer revenues split out by pre and post-pay and report their business customers separately. There are variations in the amount of revenue generated by users based upon the profile of the customer, age, geographical location, and other socio-demographics also playing a key role.
Most mobile operators (and other media companies) publish this data on an annual basis to demonstrate the health of the business, amongst other commercial reporting metrics.
How is ARPU in telecom calculated?
ARPU is calculated by dividing the total revenue generated over a specific time period by the number of users on the network.
What are the key trends of telecom ARPU?
Over the last decade, measuring ARPU & AMPU has become critical to decision making for those working within operators. These measures are also more complex due to the way in which the industry has evolved from simple network services (voice, text) to offering broader range of network and digital services. Using this data operators can make investment decisions related to network and services including subsidises, network rollout or investment into other digital services. It also enables operators to better understand trends and relationship between investment and service uptake/consumption.
Alongside significant market dynamics, consumer behaviours have changes from generation to generation, with increased use of smart devices that in turn also impact APRU generated, for example 4G to 5G migration has shown upward of 20% increase in data usage (Source: Strategy Analytics, 2020), and more importantly increase usage amongst certain customer group for high-definition content, resulting in increased APRU.
Therefore, we should consider what the mobile operator is providing results in its base to drive value return. We see in certain African & Central Asian market the drive to migrate from 2G to 4G, which in turn allows consumers to access digital services for the first time. This key move will allow those operators to increase APRU from new services, or simply providing internet access.
We are also seeing operators globally complement basis network services such as data access with additional digital services. This in turn will generate higher revenues and increases in ARPU, compared to those constrained by offering the more traditional telecom services, such as voice and SMS.
What are the global differences in ARPU
There are strong variations in Telecom ARPU when comparing different countries and geographical regions. The most important factors and considerations are:
- Disparities in wealth and income (access to credit and affordability)
- Device-type access (e.g., feature phone vs low end vs high end smartphone)
- Access to content and digital services (e.g. basis internet access and high definition content or gaming)
- Access to network services (e.g., 2G vs 4G or 5G)
Countries reporting the highest increases in ARPU are unsurprisingly the wealthier ones, the highest being Monaco and Lichtenstein (Source: Strategy Analytics, 2020). These countries benefit from well-developed economies that boast a high amount of wealth and their populations generally have greater amounts of disposable income to spend on supplementary Telecom subscriptions & services.
Lower level ARPUs are seen in continents such as Africa, where it is estimated that only 45% of the population subscribe to a mobile service. Some of the most notable countries tend to be sub-Saharan countries such as Zambia. This is not just an issue in Africa though; India, Bangladesh & Pakistan are other prime examples as well as Venezuela in South America with the lowest ARPU on a global level (Source: Strategy Analytics, 2020).[
ARPU is lower in these countries largely due to disparities in wealth, but also due to the type of network services that operators provide. US Dollars in the third quarter 2020 compared to MTN Group, Africa’s largest mobile operator who reported that Liberia’s is as little as 3 US dollars. (* Statistica published results)
It is also imperative to consider the infrastructure available in the country. Those countries or regions where Telecom ARPU is lower tends to still be running on 2G networks. Countries with higher ARPU are either running on 5G networks or are in the process of migrating their services over to 5G with take-up of the technology continuing to increase.
This empowers mobile operators to offer wider variations of services. This leads to end users consuming more content and opting for higher value services, including 4K content, generating greater revenues in both the short and long-term.
How can Network Operators increase ARPU?
One of the key areas to focus on when mobile operators are looking to increase ARPU is to consider the customer experience of their end users, including:
- How the customer feels they have been treated on an individual basis
- The perception of the value being provided by the services offered
Mobile operators need to assess their performance and ascertain if they are providing the best possible network experience that has a range of complementary services to engage the user and match their expectations. Analysing how they serve the customer and their offerings in terms of devices, digital services and whether they can provide access to mobile device financing so that the latest handsets remain affordable should also be a key consideration.
If a consumer is able to obtain one of the latest 5G devices, for example, they are more likely to view the operator favourably and remain loyal. They are also more likely to upgrade the device in the future and generate sustained or increased revenue in the longer term.
With access to the latest devices, the consumer can more easily consume content and services from that operator, which in turn, will lead to demands for increased amounts of data and other services. This could also include purchasing content through carrier billing, which offers incremental revenue to the operator as well.
All of these different factors assist in helping to reduce levels of churn. However, due to digitalisation on a global level, the most essential and fundamental aspect is to ensure that consumers have access to devices.
Ensuring that users in regions and countries where ARPU is lower migrate from Feature Phones to Smartphones is essential. This has a wider societal benefit and provides access to the internet and opportunities for individuals, while helping to break down the digital divide. This is an important point to accentuate, as by offering affordable smartphones and financing in countries with lower ARPU, operators will be encouraging adoption of higher value services in the medium and long term.
This will be a key driving force in increasing ARPU globally, rather than the higher ARPU levels being concentrated in a relatively small number of countries. It will also assist in the transition from the mobile being a secondary device to be the end user’s primary device for the consumption of content.
Trustonic’s Telecoms platform empowers operators with mobile device management to make smartphones more accessible and affordable. Our platform helps reduce credit rejection rates, without increasing commercial risks and also helps to combat fraud and profit erosion by securing porous supply chains.
