What is ARPU in Telecom Business and Why It Is Declining?

ARPU stands for Average Revenue Per User. It is the earning of a telecom company of one single user per month from its services.

A strong of per-user revenue graph indicates a robust financial status of a company. Additionally, a higher ARPU represents just how popular a company’s services have been.

ARPU is calculated by diving the total revenue of a company within a specific period by the total number of users on its network. The amount can vary depending on the number of subscribers, age, time, geography, etc.

Telecom operators publish their data in the quarterly reports where we can find how their average revenue per user is faring. It has become a standard metric to assess the financial health of a company.

The companies made it large off their voice, international roaming, mobile data, and other services. But this trending graph has halted globally in recent years. Similarly, the latest Covid-19 effects have hurt the business in its entirety. And the change in the behavior of the consumers is also to blame for declining ARPU figures.

Do read: NTC Slump in Revenue Due to Slow 4G Expansion – OAG

Reasons telecom providers are earning low ARPU

Currently, all three carrier providers Ntc, Ncell, and Smart Cell are witnessing comparatively unflattering ARPU numbers. Below are the reasons ARPU figures have made landfall for telcos.

• The companies’ overall businesses were hurt by the waves of Covid-19 lockdowns causing a dent in their financial conditions.
• Another reason is the affordable offers they have been providing. To cater to mobile broadband, telcos launched a series of cheaper data packages while the PayG data usage has also declined significantly. This has surged data consumption in records however; the earnings have slipped.
• Similarly, landline phones have lost relevance in today’s communications dominated by smartphones, tablets, and flip phones.
• Older legacy networks that contributed to a large share of the revenue for operators are now dated. The companies are instead making a huge investment in newer technologies and expanding them has cost them further. The investment amount will take a time to churn out benefits.
• The global Covid-19 pandemic has slowed down the global economy. It has inflicted slow business across the service industry.
• The operators have been unable to draw higher revenue from roaming. The travel restrictions due to the Covid-19 mean the companies couldn’t draw much from international roaming which was already in decline before the pandemic. Still, traveling abroad has remained less than encouraging so the bleak revenue trend from roaming might continue for some months.
• The growth of Over The Top (OTT) services has led to a stunning fall in both domestic and international voice services. People with internet access these days make more calls via Viber, Facebook Messenger, WhatsApp, etc. This has directly affected the revenue from the Voice service.

Also Read:

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What can the operators do to improve ARPU?

The Corona effect is settling and that could see a recovery of ARPU growth for operators. However, the OTT apps will continue to mount a serious threat to the service providers in their regular voice service. Companies can also not afford to up the cost of data packages.

• Operators need to ensure their users are on the latest telecom service. For this, they need to speed up the expansion of 4G across all the rural areas across the country along with improving multiple factors for 4G speed. Additionally, they should also make their subscribers feel they are receiving good value for their money.
• Operators can also offer devices at a cheaper rate to migrate customers to newer technologies such as from 3G to 4G. This is because companies invest in more services in the latest tech and innovation and need to expedite their usage while getting more revenue from those latest services.
• Provide good quality voice and data services to encourage more service usage and add more efficient/quality services like VoLTE, etc. If the customers find services more reliable, they would be using the services more and spending more.
• Operators can resort to new revenue streams by diversifying their services. Increasing the number of Value Added Services (VAS) and investments could also increase the revenue from the subscribers.
• Focus on cloud business, operating OTT services for music, movies, SIP, etc. will also help them compete with foreign companies and build on their own services. Do read: Best Music Streaming Apps in Nepal
• Meanwhile, the operators can transition from Telecom Service Providers to Communications Service providers (CSP). Doing this will bring a plethora of services under their wings and create a synergistic impact on their businesses. As a CSP, a service provider will have a whole suite of communications services from their single platform enabling them to diversify their services and provide them at a cheaper rate.

Check out: Advantages and Disadvantages of Calling over OTT apps

How much do you spend on telecom services per month? Would you spend more if you find the services more convincing? Do share in the comments below.