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Two Things That Could Push T-Mobile’s Average Revenue Per User Higher
For more than a year, T-Mobile’s average revenue per user (ARPU) has been on the decline.
The carrier’s ARPU was $50.48 in the first quarter of 2014, but in the first six months of 2015 it fell to $47.33. Source: T-Mobile.
The drop has come, in part, because T-Mobile’s offered lots of great deals to bring in new customers.
And it’s paid off.
The carrier has added 1 million or more customers each quarter for 10 consecutive quarters. Source: FierceWireless.
But it’s time for T-Mobile to start earning more money from those customers.
And there are two ways the carrier can do it.
According to a recent investor note from analysts at Jefferies, T-Mobile is moving more customers to its tiered pricing plans, and earning more from device leases. Source: FierceWireless.
Why does that matter?
Previously, T-Mobile focused more on promoting its unlimited plans.
T-Mobile and Sprint are the only two major U.S. wireless carriers that still offer unlimited plans.
Eventually, users just consume more data, and the carrier is left spending more money to upgrade the network to keep up with the growing demand.
By promoting its tiered data plans, T-Mobile can funnel the new customers into plans that are better for the carrier over the long term.
But device leases are just as important in growing revenue as the plan prices themselves.
T-Mobile’s JUMP! and JUMP! On Demand lease programs allow customers to regularly upgrade their devices.
Which means customers are continually paying the carrier for their device.
T-Mobile has had leasing options and tiered plans for a while, so why will this pay off now?
Because the carrier’s marketing efforts are shifting away from installment plans to leases, and from unlimited plans to tiered ones.
And if T-Mobile keeps doing this while it adds a massive amount of new subscribers, ARPU could start creeping back up.
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