Sprint Will See ARPU Jump from iPhone 5 & Rising Data Usage

September 8th, 2011 by Trefis Team
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Sprint (NYSE:S) is getting ready to roll out Apple’s iPhone 5 from next month and this will not only boost its confidence and reposition itself as a capable competitor to AT&T (NYSE:T) and Verizon (NYSE:VZ), but will also give a significant push to its revenues from non-voice communication activities like messaging, web-browsing, downloading music, games and other apps. Sprint’s average revenue per subscriber (ARPU) from SMS, Internet and other data-intensive activities has gradually risen driven by popularity of smartphones and increasing mobile data usage with improving networks.

While we estimate Sprint’s monthly data ARPU will increase from $18.30 in 2012 to $24.80 by the end of our forecast period, Trefis members expect an increase from $18.80 per month in 2012 to $26.30 during the same period. The member estimates imply an upside of near 10% to the Trefis price estimate for Sprint Nextel’s stock.

We currently have a Trefis price estimate of $4.75 for Sprint Nextel’s stock, which is almost 50% above the current market price.

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Exponential Growth in Mobile Data Usage

According to Cisco’s Visual Networking Index (VNI) global mobile data traffic rose 2.6 times in 2010, almost tripling for the third consecutive year. The report also indicated that the average monthly traffic per smartphone doubled in 2010 reaching 79 MB versus 35 MB in 2009 and that the majority of the traffic came from mobile video streaming, which accounted for close to 50% of total mobile traffic in 2010. [1]

Speaking of video streaming, Allot’s MobileTrends report shows that video streaming growth was 93% in H1 of 2011 worldwide and Youtube was the single most popular mobile Internet destination, accounting for 22% of mobile data bandwidth. The report stated that in terms of overall app store download traffic, Apple’s App Store accounts for 84% while Google’s Android market accounts for only 13%. [2]

iPhone 5 A Major Win for Sprint

The iPhone 5 win puts Sprint on the same footing as AT&T and Verizon as both sell iPhones, and this will also help it gain more subscribers and improve its market share which has been declining since past few years. (see A Sprint-Apple iPhone Deal Could be a Win-Win) With overall increasing mobile data usage and Apple’s App Store attracting heavy traffic as pointed above, we expect to see a significant spike in Sprint’s data ARPU.

Our complete analysis for Sprint Nextel’s stock is here.

Notes:
  1. Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2010–2015, Cisco, Feb 2011 [↩]
  2. Allot MobileTrends Report Shows Significant 77% Growth in Mobile Data Bandwidth Usage in H1 2011, July 2011 [↩]