) competes with AT&T (
) and Verizon (
) both in the prepaid and postpaid mobile business. Postpaid
customers are more valuable as they have higher levels of usage,
higher data usage and lower attrition rates, which all lead to
higher levels of ARPU (average revenue per user).
For this reason, Sprint and all of the major US wireless
carriers mostly focus on postpaid users. However, we pointed out
recently in an article that Sprint's prepaid business is key
component of Sprint's business (
Prepaid Market Could be Key for Sprint
Taking into account both voice and data contributions, we wanted
to see how much a prepaid vs. postpaid customer is worth to the
$4.35 Trefis price estimate for Sprint.
Let us assume that once a customer starts with Sprint, he or she
remains a subscriber in perpetuity. His or her ARPU contribution
will grow based on our voice ARPU and data ARPU forecasts, which we
detail below. We expect voice ARPU to remain stable over the
medium-term while data ARPU should grow at a steady pace given the
increased usage of mobile internet and better network
We then deduct the company's wireless expenses, including the
loss on handset sales and indirect expenses like capital
expenditures proportionally, and discount these future cash
What do you think the lifetime value of a postpaid vs.
prepaid subscriber is?
Postpaid $417 vs. Prepaid $380
B. Postpaid $322 vs. Prepaid $244
C. Postpaid $537 vs. Prepaid $180
D. Postpaid $391 vs. Prepaid $149
Breaking Down Prepaid vs. Postpaid ARPU
We estimate that Sprint's postpaid voice ARPU is a little over
$33 per subscriber per month compared to $25 for a prepaid
subscriber.The overall data ARPU stands at close to $15 per
subscriber which is a mix of prepaid and postpaid, and if we
breakup data ARPU in a ratio similar to that for prepaid vs.
postpaid voice ARPU, we get postpaid data ARPU to be around $15.70
and a prepaid data ARPU of around $11.90.
So postpaid ARPU (voice + data) is around $49 ($33 +$15.70)
and overall prepaid ARPU is around $37 ($25+$11.90) per
subscriber per month.
You can see
the complete $4.35 Trefis price estimate for
Sprint's stock here.