The PhoneBoy Blog

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Cingular and their declining ARPU

According to Cingular’s announcement about their Q1 2005 earnings, despite increasing the number of people who have Cingular as their wireless carrier to over 50 million, average revenue per user is down 3.3 percent. To quote from the press release:

Reported average revenue per user (ARPU) in the quarter was $49.59, versus $49.97 (pro forma) in the preceding quarter and down 3.3 percent from pro forma ARPU of $51.26 in the year-ago first quarter. This represents a significant slowing in the ARPU decline versus the preceding quarter, when the year-over-year decrease was 5.5 percent. Among other factors, ARPU benefited from a substantial increase in data revenues.

I have a very simple explanation for the lower ARPU: the increasing mobile to mobile calling community. I was having dinner with a friend of mine recently who, when he was with Sprint, easily used 4000 minutes a month. Since joining Cingular, the number of non mobile-to-mobile anytime minutes for all of his lines plummetted way below 1000 minutes a month. The vast majority of his minutes are mobile-to-mobile, and are free on rate plans of $39.99 and higher. I have a similar usage pattern. Between the three lines I have on my Cingular account, I use maybe 300 anytime minutes of my 850 minutes per month. The vast majority of the calls are mobile-to-mobile.

Anyone who follows the telecommunications industry knows that voice revenues as a whole are declining, particularly as the cost to provide voice service approaches zero. Here’s just another example of that.

Notice the last sentence in the quote I took from the press release. ARPU benefited from a substantial increase in data revenues. While the carriers certainly are hoping to make money on data, they still have yet to figure out a way to get anyone outside of the technorati to actually use a wireless carriers data services. They haven’t created the killer app for wireless data–yet. Once they do, you can bet that people will start using wireless data and the carriers will be happier.

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