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Thread: Missing the big picture

  1. #1
    john is offline
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    Missing the big picture

    I believe people have been so cought up in the subscriber numbers that they are missing the big picture. Lets first start with the thing that I think is the most missed by people, the ARPU. That as gone up, yes thats right after quarter after quarter of it coming down ever so slightly it as gone up and not by just a few cents but by 2% (ARPU=10.60). Now for those that like to equate this to subcribers that would be like adding 190,000 subscribers to the rolls in the 4th quarter. I find it amazing and so should most that with the economy the way it is, that they were able to get more people to spent more money on a nonessential like satellite radio. You guys have to get out of looking at just the subscriber numbers and I am not saying that they also are not important put they are not the only metric that needs to be looked at. There are other numbers just as important. For instance if the ARPU were to have gone down by 25 cents instead of up. It would make a churn rate of 1.6 look terrible or even adding another 190,000 subs. You see keeping a sub or getting another one means nothing if they dont pay anything.



    Now lets get into why if they can show they are starting to get into a major part of the synergies they dont really need anymore subs to be profitable. First it has been said before by several analyst that 10.5 to 11.5 million is the break even number of subs to become profitable (on a stand alone basis XMSRs number was a little bigger). One only needs to look at SIRI 2007 4th Q FCF positive to see that, they were FCF positive for the last half of 2007 (if you take FCF from the 4th Q and add that to the 3rd Q (ref. 4th Q CC)). I have a number that I believe is now the break even number, when both are working like a single company (still a few years off) that number is 16 million subscribers. The thing is now they are getting to at least 50% or more on becoming one company already. So if you consider 21 to 23 million subscribers needed at total with no synergies to become profitable. Then take 25 %, which is the same as taking 50 % of the cost off of one companies (P.S. there will never be a full 100% savings, extra content and a few other things will always be needed for both, the best case it will get to is 65% to 75%) you will get a number of 15,750,000 subs needed to be at break even. The bottom line is that they already have about 3 million more subs then they need to become profitable if they can get to the full savings of the merger.



    As a side note, those figures did not include the EXTRA interest that now needs to be paid. That will add about 1.5 to 1.75 million more subs to the 16 million number.

  2. #2
    imromo24 is offline
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    definition
    ARPU-Average revenue per user (sometimes average revenue per unit) usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, it is the total revenue divided by the number of subscribers.

  3. #3
    JohnnyIrishXM is offline
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    Great post John,you are right on the money...
    When i look at 1Q report and going forward my keys are:
    1.Revenue

    1a.Arpu(avg revenue per unit)

    2.Expenses

    3.Sub-adds
    a.OEM(auto's)
    b.retail
    c.Iphone(future)

    4.Churn(currently1.7% per month,disconnects from total self pay subs per month)

    5.Debt

    6.EBITDA(Earnings,Before,Interest,Taxes,Depreciati on,Adjustments)

    7.FCF(Free Cash Flow)
    Last edited by JohnnyIrishXM; 04-02-2009 at 09:42 AM.

  4. #4
    john is offline
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    imromo24, thanks for that definition of ARPU. I forgot some may still not know what that is.


    JohnnyIrishXM, thanks, while I still think it is important for them to show grow in subs. I have always felt ARPU and a few other metrics are as important, and I just felt those other metrics were getting lost in the background.

  5. #5
    FoolNHisMoney is offline
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    JohnnyIrish, 1.7% is for self-pay subs. Not total subs.

  6. #6
    LMaze is offline
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    Truly excellent posts all around. In this recession and in this automotive sales depression, we are growing and the benefits of the merger are appearing on our bottom line. Whereas in the past growth was the factor in the share price I believe after this first quarter John's metrics will determine the share price growth, even more so now that our financial house is in order. I still believe that we will break one dollar by the end of the year.

    I am continuing to purchase the stock and am holding on for the very long haul

  7. #7
    JohnnyIrishXM is offline
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    Quote Originally Posted by FoolNHisMoney View Post
    JohnnyIrish, 1.7% is for self-pay subs. Not total subs.
    Are you sure?annual report says total subs.What is difference from total to self pay subs?are you talking promo's (trial subs)do not count?

  8. #8
    john is offline
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    Quote Originally Posted by JohnnyIrishXM View Post
    Are you sure?annual report says total subs.What is difference from total to self pay subs?are you talking promo's (trial subs)do not count?


    Johnny, the problem is that as we know of the 50% penitration rate on OEMs, only just under half of those stick with it. That is why the all in churn is so much higher then self paying.

  9. #9
    JohnnyIrishXM is offline
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    Quote Originally Posted by john View Post
    Johnny, the problem is that as we know of the 50% penitration rate on OEMs, only just under half of those stick with it. That is why the all in churn is so much higher then self paying.
    Yes,that is what i thought,
    Thanks John(just in case homer chimes in)homer your thoughts?

  10. #10
    JohnnyIrishXM is offline
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    Quote Originally Posted by FoolNHisMoney View Post
    JohnnyIrish, 1.7% is for self-pay subs. Not total subs.
    Thanks Fool,appreciate it...

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