Qualcomm and Teleepoch
Enter Into a 3G CDMA Subscriber Unit License Agreement, October
6, 2007
MTN chooses Cambridge Broadband
Networks for multi-service wireless network in Rwanda, October 6,
2007
Brazilian government to
publish 3G bidding rules soon, October 6, 2007
KTF 3G service suffers
from technical problems, October 6, 2007
Argentina’s Personal
lunches 3G service in Rosario, October 6, 2007
Russia has it's first 3G
network, October 6, 2007
AT&T could drop Alcatel-Lucent
as 3G mobile network supplier, October 6, 2007
Enea Extends License Agreement
with ZTE for 3G Handsets, October 2, 2007
LG to unveil premium handsets
in Brazil, October 2, 2007
KTF 3G subscribers doubled
in less than 3 months, October 2, 2007
3G policy in India will
be non-uniform, October 2, 2007
- previous news
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ARPU is not the best way to measure success - report
June 16, 2003
"Average Margin per User" (AMPU) provides a basic -- but generally unacknowledged
-- measure for the success of wireless operators. By focusing on AMPU,
operators can generate profits sooner -- and at higher rates -- than otherwise
would be the case, according to The Shosteck Group, an independent telecommunications
consultancy based in Wheaton, Maryland, USA.
Today ARPU is the accepted metric of success for mobile operators. However,
the firm takes issue with this.
Over the past decade, the industry has expressed dismay at declining
ARPU. Part of this dismay stems from the assumption that declining ARPU
implies a loss in profits. Few financial analysts have questioned whether
low ARPU customers actually lose money for operators -- or how operators
could profit even if ARPU would continue to decline. Nor have they questioned
whether high ARPU customers are consistently profitable.
The firm observes that the current focus on ARPU is misplaced.
The importance of ARPU rests on two widely articulated assumptions: (1)
that margins for the lowest ARPU customers are inherently unprofitable
and (2) that new data services will lift ARPU, and with that, profitability.
However, both are flawed. By adopting either, operators may extend losses
rather than increase profits.
There are two reasons for this. First, low revenue per user need not
preclude a positive AMPU -- low revenue users can still be profitable
as long as ARPU exceeds average cost per user. For example, prepay customers
have been widely assumed to be unprofitable. Prepaid customers may be
low ARPU. However, they may generate higher revenue per minute than do
post-pay customers. In addition, they require no handset subsidies, no
billing and collection costs, and produce minimal bad debt. For these
reasons, they can generate positive AMPU and with that, profits.
Second, even though data services will raise revenues, the full costs
of delivering data may exceed such revenues and AMPU will be negative.
For such reasons, understanding AMPU becomes essential if operators are
to increase profits.
The firm notes that a multitude of cost factors may affect the AMPU of
a given offering.
Handset subsidies, infrastructure investment, network operating costs,
and marketing and advertising costs are among the most important. In some
cases, all of these factors will not be relevant. Operators such as Virgin
Mobile, do not subsidize handsets. Some applications, such as SMS, may
use so few network resources that the costs of the infrastructure required
to deliver them are minimal.
An operator may increase traffic by subsidizing an expensive handset.
However, the incrementally greater traffic may not generate the revenue
needed to recover the cost of that subsidy. A new offering may require
additional infrastructure. To the extent that it does, the costs associated
with it increase. Given this, operators must balance the cost of the infrastructure
against the revenues the new offering will produce.
The mobile world has talked forever about the "killer application" --
the Holy Grail of operator profits -- but no one has ever defined it.
This study defines four elements.
First, the "killer app" generates inordinately high traffic volumes.
Second, it produces especially high revenue (ARPU). Third, it produces
high margins (AMPU). Fourth, its traffic volumes and revenues drive the
construction of sufficient infrastructure, RF and network, to support
yet unknown future applications.
Frequently, voice has been dubbed the killer app. It generates high volumes,
95 percent or more of network traffic. It produces high revenues, 80 percent
or more of operator ARPU. However, in the face of competition, voice fails
to produce sufficiently high margins. If margins were sufficient, neither
the balance sheets nor share prices of so many operators would be distressed.
Nor is voice driving construction of network infrastructure capable of
supporting future applications. If it were, the voice networks in Europe
and the U.S. would not be so over-loaded, nor would operators show such
reluctance to construct networks, in particular those to support UMTS.
The study concludes that the concept of a killer application is a myth
and likely an unobtainable goal.
For operators in a competitive market, there is no magical service that
will lead to excess profits. They must build their network to enable a
plethora of offerings, each of which contributes to profit. Key to this
is selecting offerings that can produce profits. The AMPU model and analysis
are intended to support this goal.
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3G Motorola A920
