Verizon Communications experienced a downturn in quarterly revenue on Monday, missing analysts’ expectations as fewer consumers upgraded their phones and its prepaid wireless subscriber base significantly declined.
The company’s revenue for the second quarter amounted to $32.8 billion, falling short of the anticipated $33.06 billion, primarily due to the impact of reduced phone upgrades and a sharp drop in prepaid wireless subscribers.
The decrease in prepaid wireless subscribers was notably influenced by the termination of the federal Affordable Connectivity Program (ACP), which ended in May. This program provided internet subsidies to 23 million low-income households across the U.S. As a result, Verizon lost 624,000 wireless retail prepaid subscribers in the second quarter, with the end of ACP being a major contributing factor to this decline.
The fallout from the ACP’s expiration has also affected other telecom and cable companies, with shares of AT&T, T-Mobile US, Charter Communications, and Comcast falling between 1.3% and 3%. Analysts, like Craig Moffett from MoffettNathanson, suggest that the market’s negative reaction reflects the severe impact of ACP’s end, highlighting that the cable operators are similarly vulnerable.
Despite these challenges, Verizon’s finance chief Tony Skiadas indicated some optimism during the post-earnings call. He noted that most of the disconnections due to the ACP’s expiry had already occurred, suggesting that the adverse impact would likely diminish in the upcoming quarter.
Additionally, analysts anticipate a potential boost in phone upgrade activity with the anticipated release of new iPhones featuring artificial intelligence (AI) capabilities later this year.
On a more positive note, Verizon’s new myPlan, which allows customers to pay only for the services they use, has been well received. This plan contributed to the addition of 148,000 net monthly bill-paying wireless subscribers from April to June, surpassing the estimate of 127,870.
This marked an improvement from the previous quarter’s loss of 68,000 subscribers, indicating that Verizon’s new offerings are resonating with customers.