Consumers spreading cellular spending across multiple connections

 New study finds that revenue per 'real' user increasing in North America, declining in Western Europe; multiple connections distorting ARPU and market penetration

LONDON, UK, 10 September 2009: A new Wireless Intelligence study into multiple cellular connections per user has revealed that individual consumer spending on cellular services is considerably higher than reported Average Revenue Per User (ARPU) implies, particularly in North America. The study is based on primary research and found that users are typically spreading their spend across multiple SIM cards or devices, which is distorting reported industry metrics such as ARPU and market penetration.

In North America, the study found that revenue per real user has actually increased in the region over the last two years despite the macro-economic turmoil. However, in Western Europe, the results show that consumer spending on cellular services is in decline and opportunities in areas such as mobile broadband are not being realised.

The study measured the number of multiple connections per user to calculate 'real' penetration and revenue per 'real' user rather than using the traditional method of simply dividing revenue (ARPU) or population (penetration) by the number of connections. Based on this methodology, we found that North America has a 'real' market penetration of 71 percent in 3Q09 compared to reported penetration of 92 percent, while Western Europe has a 'real' penetration of 87 percent compared to a reported 128 percent.

The multiple connections issue has also distorted ARPU, which is considered to be falling or flat in most markets based on the usual reporting methods. When calculated in terms of revenue per real user and accounting for multiple connections per user, consumer spending on mobile is shown to be rising in some regions. This phenomenon is particularly visible in North America (see charts below). According to Wireless Intelligence, reported ARPU (revenue per connection) in North America has been flat at around USD51 since 2006, but the new study reveals that revenue per real user has increased from USD60 to almost USD64 over the same period.

In Western Europe, revenue per connection has been falling by 5.4 percent (CAAG) over the last three years, while revenue per real user is also declining, though by a smaller margin, by 2 percent a year over the same period. The study found that revenue per connection in Western Europe will fall to EUR23 this year compared to EUR24.7 in 2008, while revenue per real user will fall to EUR33 this year from EUR34.2 in 2008.

"The results are striking in North America where we clearly see that consumers are spending more on cellular services despite the backdrop of a troubled macro-economic environment" said Joss Gillet, senior analyst at Wireless Intelligence. "However, while it appears that there is still room for growth in North America, our research suggests we are reaching user saturation in Western Europe. The region is entrenched in a phase where the prevalence of multiple SIM or device ownership is driving connections growth but revenue per real user is falling. This reflects the clear urgency for mobile operators in the region to invest in value-added services and network quality to generate profits."

Registered Wireless Intelligence members can download the full report here [1]  

 North America: Revenue Per Connection vs. Revenue Per Real User
Source: Wireless Intelligence, primary research

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