An industry update for Verizon, AT&T, and T-Mobile.
The continued business and fiscal success of Verizon and AT&T is important to all retirees and the current workforce, through our pension, benefits, and our investment in company stock over the decades.
In late-July Bloomberg News began to examine the metrics of the two companies as they reported second-quarter results, and startled investors after $40 billion in market valuation was erased following less than stellar financial performances from two of the communication industry’s biggest players.
While AT&T did experience a massive gain of 1.06 million wireless customers in the period, it was directly attributable to a costly phone giveaways program.
To net more than one-million customers the free phone promotion resulted in significantly higher costs, cutting into free cash flow, and resulting in the stock dropping 7.6%.
In this year’s first quarter, AT&T reported 101.6 million wireless subscribers.
In Verizon’s case, the company elected to steer away from such freebies. The problem was that such strict fiscal and promotional discipline in the face of your #1 wireless competitor’s largesse let the company fall far short of new customer acquisition targets.
In the second quarter, Verizon only added 12,000 monthly wireless phone subscribers, well below analyst’s projection for 167,200. According to Verizon, the carrier currently has 143 million subscribers.
The problems for AT&T and Verizon presented an opportunity for T-Mobile’s growing presence. It posted a net gain of 723,000 postpaid phone subscribers in the fiscal quarter ending in June. This significantly topped the predictions by Wall Street analysts of a growth of 573,000 new customer connections.
T-Mobile has since raised its guidance for the full year, saying it expects net customer additions of between 6 million and 6.3 million, a market share increase of about 3.5%. According to the carrier’s recent investor report, T-Mobile has 109.5 million subscribers.
T-Mobile acquired Sprint in 2020 in a deal valued at $26 billion, netting it 2.4 million migrations to T-Mobile plans.
With growing inflation and projections that more customers may fall behind on paying for their service in case of a recession, the major players will need to be mindful of customer delinquencies and defections.
This article was first published in the Fall 2022 BellTel Newsletter.