Dave...Just take a look at this..
From the 10-K.
CPGA!
Cost Per Gross Addition. We consider CPGA to include the amounts in SAC, as well as advertising, media and most marketing expenses. In our financial statements, SAC costs are captured in the Subsidies & Distribution while CPGA costs are captured by the combination of Subsidies & Distribution, Advertising and Marketing, plus the negative margins from equipment sales. CPGA does not include marketing staff and subscriber communication costs (found in the Retention & Support) or the amortization of the GM guaranteed payments (found in Amortization of GM Liability). During the years ended December 31, 2002, 2001, and 2000, we incurred expenses of $145.5 million, $84.0 million and $6.7 million, respectively. CPGA for the full year 2002 was $430 .
Subscriber Acquisition Costs. We consider subscriber acquisition costs to include radio manufacturer subsidies, certain sales, activation and installation commissions, and subscriber product- and hardware-related incentives. These costs are represented in Subsidies & Distribution on our financial statements. Subscriber acquisition costs do not include ongoing loyalty payments to retailers and distribution partners, payments under revenue sharing arrangements with radio manufacturers and distributors and certain guaranteed payments to General Motors. During the years ended December 31, 2002, 2001, and 2000, we incurred expenses of $54.1 million, $9.2 million and $0 million, respectively,
related to subscriber acquisition costs. Our average subscriber acquisition cost was $116.03 during 2002. The amount of these total costs will vary in future years, but is expected to increase in the next year as the number of subscribers and revenue increase.
Go figure your Cost of Capital on a CPGA of $430 @ 14%! "Interest-only" on just your CPGA in 2002 is $60. That's half your ARPU to just fund your Cost of Capital. Were not even talking about re-capturing your initial CPGA, or defray OpEx.
So you see, it really has very little to do with how good the service is.. Or how niffty the radios are.. It all comes down to sticking the numbers in a spreadsheet and finding out that they don't work out.
Message 18272472
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