Report: European operators envious of U.S. prepaid ARPU

New figures suggest that growth in prepaid mobile subscriptions as a proportion of total connections has plateaued, and it also appears that European operators are looking enviously at the higher average revenue per user that their U.S. counterparts are able to generate from non-contract customers.

According to latest statistics from Wireless Intelligence, the global split today of 77 per cent prepaid and 23 per cent contract as of the first quarter will be strikingly similar in five years' time at 76 per cent prepaid and 24 per cent contract in the fourth quarter of 2017.

"This suggests that growth in prepaid as a proportion of total connections has now plateaued, having increased steadily from around a third at the turn of the century to more than three quarters now," Wireless Intelligence said.

The research firm added that contract-based connections are expected to increase slightly across all global regions, which will no doubt come as welcome news to European operators that are trying to shift subscribers over to higher-value contract plans.

Nevertheless, a notable exception is the Americas, where prepaid is still growing steadily in the United States. In addition, Wireless Intelligence noted that prepaid ARPU levels in the U.S. are high relative to other developed markets.

"On average, at $19.44 prepaid ARPU in Q4 2012 in the U.S. was around one third (32%) of average contract ARPU. This compares to about a quarter (26%) in France and Spain; one fifth (21%) in the UK; and 18% in Germany," the firm said.

Part of that may because so many smartphone users now in the United States are choosing prepaid plans. According to recent research from the NPD Group, prepaid smartphone unit sales doubled year-over-year in the first quarter, representing 32 percent of total U.S. smartphone sales, which is an 11 point increase year-over-year and a 10 point increase from the record-high share of 22 percent reached in the fourth quarter of 2012.

This is certainly causing envious looks from European operators, which are already struggling to maintain ARPU levels in an increasingly competitive market

"I wish I had a similar no-contract business in Germany or in Europe, as we have in the U.S.," Deutsche Telekom CEO Rene Obermann said on a recent conference call. He noted that ARPU at prepaid operator MetroPCS, which DT's T-Mobile USA merged with earlier this month, was "in the vicinity of $40, [which] is wonderful."

Wireless Intelligence said it expects prepaid connections in Europe to decrease by 3.4 percentage points over the next five years to 57 per cent of the total in 2017, giving the region the second-lowest prepaid share behind Oceania (52 per cent).

Europe's operators have been adopting more innovative approaches to contract tariffs in a bid to lure over prepaid customers, such as offering shorter tie-in periods, providing SIM-only options at a lower rate, bundling mobile contracts together with fixed plans and tying in reward schemes, to name a few.

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