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What is an ARPU?
ARPU refers to average revenue per user, or in some cases, average revenue per unit. It is the measure of the revenue generated per user or unit over a period of time, either monthly or yearly.
How is ARPU measured?
ARPU is measured by the total revenue of the telecom operator divided by its total number of users or subscribers. The average revenue per user measures the realisation per subscriber and is a key monitorable metric for telecom companies. It is a significant indicator to track sources of revenue and growth.
Telephone carriers and other industries including telecommunications, consumer Internet service providers, digital media, and networking companies widely use this metric term to assess their revenue-generating potential at the per-customer level. ARPU is generally compared between similar firms operating in the same sector to measure how well each firm is doing in comparison to its peers.
For instance, if one telecom firm generates an ARPU of Rs 200 compared to a similar telecom firm generating an ARPU of Rs 100, there is a high probability that the firm generating an ARPU of Rs 300 is more profitable. An increase in the ARPU means improvement in the monetisation of the user base.
How to calculate ARPU?
The ARPU is calculated by taking all the revenue generated for a period of time and dividing it by the number of average subscribers, To put it simply, the ARPU of the mobile phone means the total amount of mobile phone revenue per month divided by the number of users.
For example, if a company has produced Rs 10 lakh in revenue with 10,000 consumers, the ARPU is Rs 100.
ARPU = Rs 10 lakh/10,000 consumers = Rs 100
Each consumer contributed Rs 100 in revenue.