What is “price management”? In mobile communications, headline ARPU and MoU can be misleading because in many markets there is high double-counting of users.RPM (revenue per minute) is often more useful than ARPU; and in practice we see changes in RPM as the best guide to how efficiently operators manage voice prices.
Where MoU (strictly speaking, MoU adjusted to avoid the effects of double-counting) rises by more than RPM falls, there is positive elasticity of demand and it makes sense to cut prices. Where MoU rises by less than RPM falls, there is negative elasticity and cutting prices does not make sense unless it also boosts subscriber growth.
Sample for Indonesian operator, in the wake of a price offensive launched by no.2 operator Excelcomindo, Indonesia’s mobile market is showing the highest elasticity in Asia: steep declines (50% or more) in RPM have driven increases in adjusted MoU of 200-300% or even higher. I think this strong growth in usage can be sustained. Excelcomindo (owned by Telekom Malaysia International) should be the primary beneficiary, but leading operator Telkomsel (owned by PT Telkom and SingTel) also stands to benefit over time.
Next question: when we will know how to reach for the right price?
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