Thursday, May 27, 2004

How high can ARPU go?

ARPU or Average Revenue Per User is the way that mobile operators judge how well they are doing in mining expansion opportunities within their current customer base. This is especially important in western markets where mobile phone use is virtually ubiquitous so no new growth will come from expansion of the customer base. It looks as if the news is good for operators who have bet on next generation services, if you believe the results of a JD Power and Associates survey reported on the BBC. "It is quite amazing really that people are spending more on their mobile than on gas or electricity bills," Gunda Lapskim, a JD Power director, is quoted as having said. Much of this spending is on services beyond voice. But how much will people pay for communication services even if entertainment is included? How high can ARPU go?

According to the survey, the average monthly bill rose by 14% since 2003 -- an average of 534 British pounds per year. If the annual increase continued at 14% for the next 10 years, ARPU would grow to almost 2000 pounds per year. Even allowing for inflation, this still suggests that people would be willing to spend as much on their mobile bill as they would for a new desktop computer... every year.

Here is the full JD Power press release in which the rankings of UK operators are also disclosed -- Virgin is number one amongst pre-pay customers and Vodafone is number one amongst contract customers. "Image" competes closely with "Call Quality/Coverage" as the most important factor...

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