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LTE vs ARPU – data takes over

…operators still have stagnant or falling ARPUs, with the time since LTE was introduced not having a bearing on this result. However, the portion of revenue gained from non-voice services has been increasing

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Now that operators the world over are fully dedicating themselves to LTE investment, with the earliest implementers now four years on, it is interesting to examine the effect this is having on the pockets of both the operators and the users of this technology. We have investigated several of these early movers who implemented LTE in Scandinavia, Australia and the United States to see what has happened to mobile ARPUs over the past four years, what portion of revenue is generated by mobile data, as well as seeing how much a user may be expected to part with per month to utilise this technology.

We found that all operators still have stagnant or falling ARPUs, with the time since LTE was introduced not having a bearing on this result. However, the portion of revenue gained from non-voice services has been increasing in the few operators that report it, suggesting the importance of mobile data as a revenue stream. Users who want a data-based mobile plan with an allowance of 1GB or more can be expected to pay over NZD40 per month for the privilege. Exhibit 1 lists the operators we have included, along with when they first made LTE available, and whether there is a price premium over 3G services.

Exhibit 1: Selected mobile operators and when they started rolling out LTE [Source: operators]

Country Operator Date LTE introduced Does LTE have a price premium? *
Australia Telstra September 2011 No
  Optus April 2012 No
Denmark Telenor March 2013 No
  Telia December 2010 No
Finland DNA December 2011 Yes
  Elisa December 2010 Yes
  TeliaSonera November 2010 Yes
Norway Telenor October 2012 No
  TeliaSonera December 2009 No
Sweden Telenor November 2010 No
  TeliaSonera December 2009 No
United States AT&T September 2011 No
* As at December 2013 

The following six graphs illustrate the quarterly ARPUs for the operators, grouped by country, for the past four years. All these operators have had a slightly declining ARPU since the beginning of 2009. The crosses on the graphs represent when LTE was first introduced by each of the operators. There is no immediate change in ARPU trend at the time of LTE introduction for any of the operators, which seems reasonable as it takes time for LTE coverage to expand, and for customers to migrate to devices that can take advantage of the new technology. Additionally, the operators that were the first to roll out LTE do not seem to have an advantage in their current level of ARPU compared to the operators who introduced LTE later.

Exhibit 2: Mobile ARPU for operators in Australia [Source: operators]
Mobile ARPU for operators in Australia [source: operators]

 

Exhibit 3: Mobile ARPU for operators in Denmark [Source: operators]
Mobile ARPU for operators in Denmark [source: operators]

 

Exhibit 4: Mobile ARPU for operators in Finland [Source: operators]
Mobile ARPU for operators in Finland [source: operators]

 

Exhibit 5: Mobile ARPU for operators in Norway [Source: operators]
Mobile ARPU for operators in Norway [source: operators]

 

Exhibit 6: Mobile ARPU for operators in Sweden [Source: operators]
Mobile ARPU for operators in Sweden [source: operators]

 

Exhibit 7: Mobile ARPU for AT&T [Source: AT&T]
Mobile ARPU for AT&T [source: AT&T]

So if the operators’ ARPU is remaining stable or declining even after introducing LTE does that mean that it was all a colossal waste of time? Well, looking at the portion of ARPU/service revenue that is attributable to non-voice services, (Exhibit 8 and Exhibit 9), this does seem to be where the action is.

Exhibit 8: Non-voice revenue as a percentage of service revenue for Optus Australia and Elisa Finland [Source: operators]
Non-voice revenue as a percentage of service revenue [source: operators]

 

Exhibit 9: Data ARPU compared to total ARPU for AT&T [Source: AT&T]
Comparison of data ARPU and total ARPU for AT&T [source: AT&T]

So how are customers paying for these non-voice services, in particular those with LTE devices?

We reviewed data-based mobile plans from some of the operators above, to see how much they would set the customer back per month. The comparison focussed on relatively high data allowances (1GB to 10GB per month) and plans that allowed the data to be shared between multiple devices. An interesting point to note about these plans is that in almost all cases unlimited voice and SMS is included in the monthly cost. The base monthly cost for these plans is shown in Exhibit 10, and shows that the Scandinavian countries are relatively cheaper than Australia or the United States. Not one of these plans, however, comes in at less than NZD40 per month for even 1GB, whereas AT&T’s 10GB plan costs over NZD140 per month, so it is hardly a small investment.

Exhibit 10: Monthly cost of data-based mobile plans that allow data sharing, December 2013 [Source: operators]
Monthly cost of data-based mobile plans that allow data sharing, December 2013 [source: operators]
* Telia Denmark’s data sharing plan has a 20GB data allowance

And when it comes to sharing this data between multiple devices there are additional monthly costs involved (Exhibit 11). In nearly all cases there is an additional monthly cost for adding a device to the plan. This is usually fairly small (NZD5 to NZD15 per month) for data sharing with a tablet, however to be able to share data, minutes and SMS with another smartphone can cost over NZD35 per month. There is quite a range of how extensive this data sharing can be between operators, with some operators allowing only one smartphone and one tablet on a plan, whereas the Swedish operators allow up to seven smartphones/tablets on a single plan. Going further than all the other operators considered is AT&T in the United States which allows up to ten devices to share a plan’s voice and data, which covers not only smartphones and tablets, but laptops and portable mobile hotspots, cameras and wireless home phones. These are, however large cost / large data plans, so where does this fit in with fixed broadband offerings? Are you expected to have both as a user, or choose one, in which case if the operator also has fixed broadband aren’t they just reallocating revenue?

Exhibit 11: Monthly cost for additional SIM cards for data sharing mobile plans, December 2013 [Source: operators]
Monthly cost for additional SIM cards for data sharing plans, December 2013 [source: operators]
* Only charged on 3GB plan, data sharing is free on Telenor Norway’s 10GB plan

December 2013


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