Mobile phone and consumer electronics goods manufacturer BenQ is to acquire Siemens’ entire mobile phone business. As part of the deal, Siemens will invest in the Taiwan-based company by purchasing shares worth 50 million euros. BenQ will be able to use the Siemens brand name for five years. The deal is expected to close in the last quarter of 2005-06. With this, BenQ will become one of the world’s top 10 mobile handset vendors.the cost per subscriber incurred by cellular operators in India has fallen from Rs 992 per month in 1999 to Rs 210 in 2004. In fact, in the past one year, the cost per subscriber has decreased by 27 per cent.
The study further indicates that the cost of operating networks has decreased from Rs 377 a month per user in 2000 to Rs 62 in 2004. Similarly, the cost incurred for sales and marketing has come down from Rs 204 per user per month in 2000 to Rs 90 in 2004. Personnel costs have also dropped, from Rs 101 per month to Rs 31, while administrative costs have declined from Rs 163 per user per month to Rs 27.
Lower costs set in with economies of scale taking over because of the growing subscriber base, which reduces the per unit cost of providing services.
The second factor that needs to be considered is the fact that despite falling ARPUs, there has been a growth in the adjusted gross revenue (AGR). Private GSM cellular operators have recorded a 10.5 per cent increase in their AGR in the quarter ended March 2005. The figure stood at Rs 35.46 billion against the Rs 30.27 billion seen in the quarter ended December 2004.
For the fiscal year ended 2005, the AGR of GSM operators increased by 48.2 per cent at Rs 123.09 billion compared with Rs 83.04 billion in March 2004.
Bharti posted the maximum at Rs 13.35 billion, followed by Hutch at Rs 10.55 billion and Idea at Rs 5.58 billion.
This increase in revenues can be attributed, in some part, to the huge growth in subscriber base that has taken place. The subscriber base for GSM operators has increased from 26,129,433 at the end of March 2004 to 41,025,940 on March 31, 2005.
In addition to the growth in subscribers, there has also been an increase in the MoU per subscriber. The blended MoU per subscriber per month has increased from 197 minutes in 2000 to 302 minutes in 2004. The combination of more subscribers and growing usage per subscriber has accounted for the increase in revenues.
The combination of growing revenues and decreasing costs allows for profits, something that is not necessarily revealed by ARPU figures. This drawback in the ARPU metric suggests that perhaps some other metric may be a more useful indicator of profitability. This is the average margin per user metric.
A recent study by the Shosteck Group states that the AMPU might indeed be “a better metric for the wireless industry”.
AMPU is the difference between the cost of serving a user and the revenue the user generates. The greater the AMPU, the greater the profit.
Using the AMPU metric can shatter several myths in the industry. One such myth is that low-ARPU customers are inherently unprofitable. This is not true if the ARPU for such customers is higher than the average cost for that user.
Similarly, while high-ARPU data services are generally seen as the drivers of profitability, they may not prove to be so if the full costs of delivering such services are too high. In such a case, AMPU seems to be a more useful metric than ARPU.
