Following years of hype and financial promise, wireless data services are beginning to have a measurable impact on carrier revenues. During the recently completed second quarter, a number of operators cited the positive impact generated by non-voice services on their service revenues.
The growth has not only allowed carriers to begin to recoup some of the billions of dollars they have invested in their next-generation networks, but in combination with a general leveling off of voice price competition has resulted in many operators bucking analyst forecast by reporting increased ARPU.
Sprint PCS-considered by many industry analysts the leading wireless data provider among the nation’s largest operators-posted the strongest impact during the second quarter with more than 7 percent of its $62 in ARPU, or roughly $4.50 generated from data services. By comparison, Sprint PCS said wireless data services contributed 6 percent, or around $4, to ARPU during the first three months of the year and 2.5 percent, or $1.55, during the second quarter of 2003.
Similar results were posted by other operators.
T-Mobile USA Inc. attributed 5 percent, or $2.75, of its $55 in ARPU during the second quarter to non-voice services compared with just more than $1 during the first quarter of 2003. Verizon Wireless said data services accounted for $255 million, or 4.2 percent, of its total service revenues during the second quarter, compared with 1.55 percent during the first quarter of 2003. And Cingular Wireless L.L.C. reported data revenues increased from $105 million during the first quarter of 2003 to $166 million during the second quarter of 2004.
Regional carriers also reported a positive impact from their data services as U.S. Cellular Corp., which has launched CDMA2000 1x-based services in most of its markets, attributed $1 of its nearly $48 in ARPU during the second quarter to data services compared with virtually no contribution last year.
“I think these results are in line with what we have been expecting,” said Bob Egan, president and founder of Mobile Competency.
The growth in wireless data revenues has helped carriers not only reduce the predicted impact of falling voice prices on ARPU results, but in many cases reverse those trends.
Verizon Wireless has seen its ARPU-which historically has been the lowest of the nationwide providers due to a high number of “glove-box” wireless customers-grow from less than $46 during the first quarter of 2002 to nearly $51 during the second quarter of this year.
T-Mobile USA, which also has reported below-average ARPU due to its marketing emphasis on lower-priced rate plans, attributed some of its ARPU growth-from $50 during the first quarter of 2001 to $55 during the second quarter of this year-to “continued growth in revenue from data services.”
Even carriers that have not managed to maintain their ARPU results claim non-voice services have helped buffer the drop. AT&T Wireless Services Inc. noted that while ARPU slipped 3 percent year-over-year during the second quarter, wireless data revenues continue to grow, with around 45 percent of its GSM customers signing up for its mMode service at an average cost of $6 per month.
Analysts note that one caveat to the positive revenue trend is the continued reliance on basic messaging services that in many cases would not have required vast infrastructure investments to support. T-Mobile USA chief executive Robert Dotson said at a recent investor conference that SMS and MMS accounted for 61 percent of the $2.43 in data ARPU the carrier reported during the first quarter, while its WAP-based and downloadable content offerings were responsible for 30 percent.
Those results are slightly more balanced than what many European operators have reported. Vodafone Group plc announced that of the 13 percent of total revenues generated by non-voice services between the first quarter of 2003 and 2004, 10 percent were from messaging services.
“This quarter has definitely shown that the collapse in ARPU is beginning to stabilize and wireless data services have had a hand in that stabilization,” Egan said. “What’s important now is for carriers to not rest on their laurels and to continue to introduce innovative services that maintain the ease of use similar to the messaging products that have fueled the current growth.”
London-based industry research firm Strategy Analytics released a report last week predicting that while global revenues from mobile data services would grow from $61 billion this year to more than $189 billion by 2009, person-to-person messaging would represent 48 percent of that total and what it described as “lowly text messaging via SMS” would remain the dominate global application, generating 26 percent of all data service revenues in 2009.
