KPN Consumer Mobile Q4: revenue, customer growth returns for good, ARPU still weak

Monday 8 February 2016 | 13:58 CET | Background

KPN Consumer Mobile has put a definitive end to a long period of contracting results. From a peak in Q2 2009, revenues fell by 39 percent to a low point in Q1 2015. Its retail customer base fell over the same period from almost 7 million to around 5 million. The mobile operations have now reported three quarters of strong revenue growth of roughly 5 percent. The number of customers is growing again as well, with eight consecutive quarters of increase. 

Over the longer period, costs at this division have hardly fallen, and the margin has deteriorated. It has clearly cost something, in the form of subscriber acquisition and retention costs, to restore growth in customer numbers and revenues. The underlying ARPU is still falling, but the current trends suggest that this should change soon. 

We start by looking at the four components of revenues in the fourth quarter of 2015:

  • Retail service revenue: This is largely following the same path as total revenues, if not a bit stronger.
  • Retail handsets & other: eight consecutive quarters of high growth, slowing to 18 percent in the most recent quarter.
  • Wholesale service: This is more difficult and still negative, although Q4 2015 (-2.9%) showed a strong improvement over Q3 (-17.1%).
  • Wholesale handsets & other: a very small source of revenue with volatile development.

ARPU underperforming

Looking more closely at the retail activities, we see that the ratio postpaid/prepaid has improved from 50-50 in mid-2010 to 68-32. As a result, blended ARPU is only down slightly, despite the underlying postpaid and prepaid ARPUs falling sharply. There are some signs of stabilisation though, with postpaid ARPU at EUR 25 (-3.8% year-on-year) and prepaid ARPU at EUR 3 (unchanged).

The number of customers is growing, as postpaid additions offset prepaid losses. There is more bundling of fixed and mobile services as well. The number of postpaid customers who also take fixed services from KPN reached 1.172  million at the end of 2015, or 33 percent of the total, compared to 997,000 (28%) a quarter earlier. Postpaid churn fell to 9 percent from 12 percent a year ago. 

In terms of traffic, KPN only publishes figures on MBs per customer (no minutes or SMS). Average data use is growing strongly, nearly doubling in the past year. Half of customers now take a data bundle of 1 GB or larger, versus 30 percent a year ago. While there is not much evidence of this in ARPU yet, the figures should start to grow again in the coming quarters. 

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