By
Dave Mock
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More Articles
June 22, 2007
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The market for wireless services in the United States is one of the most lucrative -- and competitive -- in the world. After dozens of companies initially exploded on the scene in the great wireless gold rush of the 1990s, mergers, acquisitions, and financial implosions have whittled the list of service providers to four major players:
-
-
Verizon Wireless, a
joint venture between
Vodafone (
NYSE: VOD ) and
Verizon Communications (
NYSE: VZ )
-
-
T-Mobile USA, a subsidiary of
Deutsche Telekom (
NYSE: DT )
These four companies rake in the lion's share of new subscribers each quarter and represent the bulk of the U.S. market. As wireless voice services become a commodity business, revenue for basic voice service continues to drop. To fight this trend of declining revenue, service providers are looking for new ways to leverage wireless networks to boost consumer spending on new services. One commonly used metric, average revenue per user (ARPU) captures how effectively a company markets and sells services to its base of subscribers.
Up, up and away with ARPU
A carrier's ARPU is strongly influenced by the demographic makeup of its customer base. Carriers that tend to focus on price-conscious consumers obviously sport lower ARPUs, while those that attract more business accounts and media savvy early adopters show higher levels of average revenue. What's most important though is a carrier's trend in ARPU levels from one quarter to the next.
Here's how the four largest operators stack up in terms of ARPU:
|
Monthly ARPU
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03/06
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06/06
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09/06
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12/06
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03/07
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AT&T
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$48.48
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$48.84
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$49.76
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$49.29
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$49.21
|
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Verizon Wireless
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$48.67
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$49.71
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$50.59
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$50.12
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$50.06
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Sprint Nextel*
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$59.10
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$56.23
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$58.71
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$57.90
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$56.79
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T-Mobile
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$51.00
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$52.00
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$52.00
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$52.00
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$52.00
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Source: Company reports.
*ARPU for Sprint Nextel excludes wholesale and affiliate subscribers.
The Foolish takeaway
While Sprint Nextel carries a much higher ARPU than the other three, the company has been battling to reverse the distinct deterioration of this advantage. Problems integrating Nextel's operations into Sprint following their merger have led to a steady downward trend in ARPU there.
As evidenced by positive trends in their ARPU, Verizon Wireless and AT&T have been successful at launching new data services and media features that encourage subscribers to spend more each month.
And while T-Mobile doesn't show as much granularity in its reported numbers, the company has held its ARPU levels steady over the last four quarters, indicating that it also has done well in selling data services that offset declining voice revenues.
Until next time, dial up more Foolishness with:
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Motley Fool Inside Value
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Fool contributor Dave Mock is a combination of price conscious and media savvy. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy is all business.
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