By Harshita Mary Varghese
(Reuters) -Verizon Communications missed quarterly revenue expectations on Monday as fewer people upgraded their phones, while the number of prepaid wireless subscribers fell sharply after a federal internet subsidy ended, sending shares down more than 6%.
The telecom operator said its consumer business lost 624,000 wireless retail prepaid subscribers in the second quarter, blaming the end of the COVID-era Affordable Connectivity Program (ACP) in May for more than half of the losses.
ACP had offered internet subsidy to 23 million households in the United States who otherwise wouldn’t have been able to pay for connectivity, and now telecom companies are preparing for a hit after it ran out.
Shares of AT&T (NYSE:), T-Mobile US (NASDAQ:) and Charter communications (NASDAQ:) and Comcast (NASDAQ:) fell between 1.3% and 3%.
“That (the stock move) reflects people concluding that the impact on the ACP countries is worse than expected. It’s not just about relative price, it’s also about relative exposure and the cable operators are significantly exposed as well,” MoffettNathanson said analyst Craig Moffett.
Verizon’s (NYSE:) second-quarter revenue of $32.8 billion fell short of the LSEG estimate of $33.06 billion, as the company also struggled with historically low numbers of people upgrading their phones .
Still, there were some positive signs for Verizon. Finance chief Tony Skiadas said during a post-earnings report that the majority of closures due to ACP expirations have already taken place, meaning the impact will likely be less in the next quarter.
Analysts believe that phone upgrade activity could increase when Apple (NASDAQ:) releases its latest iPhones with artificial intelligence (AI) features later this year.
Verizon’s myPlan, which launched last May and allows customers to pay only for what they need, is also seeing strong customer acceptance.
It helped Verizon add a net 148,000 monthly paying wireless phone subscribers from April to June, above its estimate of 127,870 additions, according to Visible Alpha. The company had lost 68,000 subscribers in the last quarter.
