Sprint layoffs are cautionary ARPU tale

Sprint is a poster child for the “Value of ARPU.”

Consumer telephony is enormously impacted by the cost of customer acquisition and the reduction of churn, and a lot of “costs” are more related to sustaining the relationship than to providing services.  In that situation, it pays to have a lot of arrows in the quiver to mine revenue from each relationship.

When the other interexchange carriers (IXCs) got bought, Sprint was left on the table with no local exchange wireline business, which left it only wireless.  Every customer it loses means a special marketing effort is needed to reach out to restore, where AT&T and Verizon can mine their bases with every bill they send out, at no incremental cost.

Sprint was slow to realize it had a special advantage in being mobile-focused, as well as the special risk of ARPU management and the associated challenges with churn.  They didn’t address the issues, and buying Nextel just diverted them and increased the base of mobile-only customers, which increased all these risks.