The ARPU Challenge

RPU (Average Revenue Per User) is a simple term used in telecom industry to measure the revenue potential of the customers. Although used in ISPs and other types of telecoms sometimes referring to it as average revenue per unit, I will be referring to the ARPU from my background in mobile telecoms.

ARPU is an indicator of the company's profit potential. We use it as a benchmark to assess this potential versus our competitors'. To determine ARPU you have to determine a time frame ( week, month, quarter, etc..); In mobile telecom the usual standard used as a time frame for ARPU calculation is a month, and this is the basis I will use for this article (Calendar month).

The simplest way of ARPU calculation is to divide the aggregate revenue over the number of subscribers within the determined time frame. By number of subscribers we mean the average number of subscribers during the month. For example, if your revenues in month A were 60,000 USD and the number of subscribers was 20,000 then your ARPU will be 3 USD for that month.

The easy ARPU days were the ones when we had to deal basically with one type of service, voice mobile calls. The more developed the technology became (and the revenue sources) the more we expected the ARPU to tell us. On another hand, the customers' behavior became more complicated too, due to the increase in competition which added complexity to ARPU calculation.

ARPU is not only a fiscal indicator. What interests me more about it, is that it helps me analyze the market and build strategies to target one market segment or another, by using one or more types of service. In order to realize this target, ARPU is not only expected to provide the general figure, but rather provide details when needed.

ACPU (Average Cost Per User) and AMPU (Average Margin Per User) were other terms introduced to the telecom field but not as widely used as the ARPU yet. While AMPU is being slowly adopted by companies as an indicator to replace the ARPU I believe that market development will determine if and when ARPU will be ruled out; after all, the basis of calculation for all of them is the users and their usage trends.

Regardless of the AMPU, some colleagues argue that ARPU is not an important indicator as it may sound; however, in my experience these colleagues either lack the understanding of its importance in formulating strategies or are approaching the issue from a pure sales background. For me, ARPU will still be a main KPI (Key Performance Indicator) until proven otherwise.


Article Source: http://EzineArticles.com/?expert=Osman_Habbal