ARPU Undulations

Recognized as a bellwether for carrier performance, average revenue per unit (ARPU) is a key statistic in quarterly financial reports. Most carriers' 2Q01 ARPU figures were relatively close to their levels from the same quarter last year, another sign that wireless carriers are, for the most part, stable while the economy nosedives.

“Some of it is better than people expected given the economic situation; some of it is better given our rate of growth,” said Trevor Erxleben, Sprint Investor Relations representative (www.sprint.com/sprint/ir). Last year, most Wall Street analysts believed the industry, particularly the nationwide carriers, would see ARPU decline in 2001.

“There was some concern that as we continued to grow the customer base, we might start acquiring customers that weren't as attractive as those we already had,” Erxleben said.

Nextel (www.nextel.com), regarded as the industry's ARPU leader, reported a $72 ARPU for the second quarter, a $2 dip from 2Q00. AT&T Wireless (www.attws.com) saw a more significant decline — from $72 in 2Q00 to $64 in 2001. Mike DiGioia, AT&T Wireless spokesperson, attributed the drop to competitive pricing, new marketing programs and the carrier expanding its base of products.

ARPU for Sprint PCS was $61 for the quarter (www.sprintpcs.com). Had the carrier not begun reporting contract-cancellation fees on a net basis, its ARPU would have been $62. Nevertheless, it's an increase from $59 in 2Q00. Erxleben said the increase is being driven by increased usage.

“Several years ago, we thought we were going to have four hours of usage (average per month), and they (analysts) said we were nuts,” he said. “Well, we're at eight hours of usage, so there's been a gradual increase over time.”

Verizon Wireless, at 27.9 million subscribers, had an ARPU of $49 this quarter, which was up $1 from 2Q00 (www.verizonwireless.com).

Two affiliates, TeleCorp PCS (www.telecorppcs.com) and US Un-wired (www.usunwired.com), released eye-popping results — only one, though, was a pleasurable sight for the carrier in question.

TeleCorp, AT&T Wireless' largest affiliate, had its ARPU drop by $11 — from $80 in 2Q00 to $69 this quarter. Those figures include roaming revenue, a lucrative source for affiliates. TeleCorp's ARPU without roaming had a lesser decline — from $62 in 2000 to $55 this quarter. The decline was due to the carrier's foray into prepaid, a market it since has abandoned.

“We had just started and hadn't seen the ARPU dilution from the prepaid base,” said Russell Wilkerson, Tele-Corp spokesperson. “It came down as the prepaid base got factored in.”

US Unwired, Sprint PCS' largest affiliate, touted an ARPU of $82 (including roaming) for the quarter, up from $65 in 2000. Adjusting for the net roaming position, second-quarter ARPU was $66, said Jerry Vaughn, US Unwired chief financial officer, during the carrier's earnings conference call. The ARPU jolt was due largely to the addition of 28,430 subscribers during the quarter, 46% of which signed up for plans of $50 per month or more.

US Unwired carried approximately 80 million roaming minutes from Sprint PCS and its other affiliates. Among its PCS subscribers, the carrier averaged $31 in roaming revenue vs. $17 in roaming expense.

For the rest of turbulent 2001, the best hope may be for ARPU to stay right where it is.

“ARPU increase over the past few quarters has been a pleasant surprise,” Vaughn said. “However, we, like the rest of the industry, expect ARPU to remain flat or move slightly lower.”