Mark Goldberg


www.mhgoldberg.com





#CTS20

Not all ARPUs are the same

Not all companies report their financial metrics the same way. This became clear yesterday when international wireless carriers Vimpelcom and Orascom reported results that both showed data for their Canadian operation, Wind Mobile.

In the case of Vimpelcom’s 1Q13 results, we saw

CANADA KEY INDICATORS
Mobile 1Q13 1Q12 YoY
Subscribers (‘000) 602 415 28%
ARPU (CAD) 31.6 27.3 16%

Orascom also reported 1Q13 results yesterday, releasing its view of Canada’s Wind Mobile performance:

CANADA KEY INDICATORS
Wind Canada 1Q13 1Q12 YoY
Subscribers 601,719 415,364 44.9%
ARPU (CAD) 27.60 27.30 1.1%

What is going on? Both companies are reporting the same subscriber figures; Vimpelcom rounds to the nearest thousand, while Orascom shows every subscriber. The change percentages differ – and frankly, I cannot reproduce the Vimpelcom change number. Clearly, Orascom took the growth in subscribers and divided by 1Q12 figures to come up with its report of change percentage.

But the more important question is how could both companies report different ARPU figures for Wind Mobile in 1Q13? Vimpelcom says it was $31.60; Orascom says it was $27.60. That is a $4.00 difference, representing a nearly 15% difference.

In today’s Globe and Mail, Rita Trichur got an answer from a Wind Mobile spokesperson who said the companies use different reporting methodologies.

What are the different ways that ARPU can be reported?

As the full name suggests, ARPU – average revenue per user – is a calculated average. Use revenues as the numerator, divide by number of users, et voila!

The differences are in what numbers are used for both the numerator and the denominator. Not all revenues are the same: does the company include non-recurring subscriber revenues in the numerator, such as handset sales, one time charges, etc.? In the denominator, different companies use different ways to count pre-paid subscribers. For example, if a prepaid card hasn’t been used in the recent past, it isn’t generating revenues, so should it be included in the ARPU calculation?

For financial reporting purposes, the most important consideration is consistency – enabling comparisons over time. As long as the method is unchanged between reporting periods, two companies can report the same key indicator differently, while both can be considered correct.

Yet another reason why care has to be used when trying to compare financial reporting data between different companies and different jurisdictions.

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