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	A Time Of Turbulence- The Digital Interregnum
	Technology and adoption: Mobile services
	Indonesia
	It's good to chalk?
	Increasing Complications in ARPU

Increasing Complications in Calculating and Comparing Revenue for Mobile Operators

By Trisha Mitra

As many countries, particularly in Western Europe, are nearing saturation in mobile penetration, mobile operators have shifted their emphasis and attention from increasing their customer base, to maximizing their average revenue per user (ARPU) figures.

For instance, in the Netherlands, C.H. Vanbuttingha, an Investor Relations spokesman for KPN stated in an interview that Netherland’s mobile “penetration has reached 76% and is stabilising…the growth possibilities are limited and even some of the operators will report negative subscriber growth”. Similar growth in penetration levels encroaching saturation is occurring throughout the remaining Western European countries, where on average it is said to be already 70% of the population. The saturation point is estimated to be around a penetration percentage of 80%, since a proportion of the population that are too young or too old are less likely to own a mobile phone.

A closer examination of mobile penetration for Orange, one of the main pan-European wireless carriers, similarly reveals that their penetration market has currently reached “62% in France, 75% in the UK, and 70% in most of our Western Europe key controlled operations” according to an Orange Investor Relations Manager.

The typical methodology for calculating ARPU is by dividing the total summation of revenues from access fees, incoming and outbound traffic, visitor roaming and value added services over a twelve-month period, by the weighted average number of subscribers during that same twelve-month period.

With the shift in mobile operator’s focus to the optimisation of ARPU by extracting more money from existing subscribers, new complexities have arisen in comparing revenue amongst the different mobile operators. An evaluation of the key mobile operators’ ARPU figures display the discrepancy involved with calculating and comparing performance through revenue generated per user. One common difference across wireless operators is that interconnect charges by one operator may be factored into the computation of ARPU, while other mobile operators may exclude this variable in their revenue measurement.

A recent and significant case illustrating the complexity of comparing mobile operators’ ARPU is by one of the largest global mobile operators, Vodafone.
In the first quarter of 2001, Vodafone announced that they would amend their method in measuring ARPU, by not including their inactive subscribers from the total customer base. Vodafone pointed out that inactive prepaid subscribers are unable to contribute to quantifying revenue since these subscribers have not used the network for over three months. Apparently these adjustments in the calculations of ARPU made significant changes from the first quarter of 2001 to the second quarter of that same year.

Industry analysts have also pointed out that that with the pressures of mobile operators to produce high ARPU figures indicating progress in the company’s performance, many mobile operators may adjust their methodologies for revenue calculations to maximize their ARPU value. The table and graph below is taken from our latest research that exemplifies the dramatic change in ARPU for Vodafone in the UK from the first quarter to the second quarter of 2001 with the change in their calculations.

United Kingdom Blended ARPU

Furthermore, with the evolving migration from voice to data, services offered by wireless operators will continue to develop and become more advanced and varied amongst different carriers, leading to increasing complexities in measuring and comparing revenue.

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