By Priyanka G and Harshita Mary Varghese
(Reuters) -Verizon Communications warned that off-season promotions by rivals will likely lead to “soft” wireless subscriber growth in the first quarter, knocking its shares down more than 7% and sparking a selloff in the telecom sector on Tuesday.
The U.S.
wireless giant pulled back on customer incentives after the promotion-heavy December quarter, but rivals did not, intensifying competition, Chief Revenue Officer Frank Boulben said at Deutsche Bank’s Media, Internet & Telecom Conference.
“This first-quarter is a bit unusual,” he said.
American telecom firms have leaned on incentives in a fierce battle for customers as growth slows in a saturated market. This has boosted subscriber additions but raised worries about profits.
Shares of AT&T fell 5.3% as the company also flagged elevated subscriber churn for January, while T-Mobile US is down 4%.
“The opportunity of adding mobile subscribers is shrinking,” said PP Foresight analyst Paolo Pescatore, adding that broadband majors such as Comcast were also courting wireless customers with an aggressive strategy.
Verizon has flagged “a slow start” to phone upgrades in the first quarter, a sign that customers were holding back on purchases amid mounting worries about the health of the U.S.
economy and a lack of major new features in the devices.
However, it reiterated its target of single-digit growth in annual phone upgrades, betting on a rebound later this year.
The company also expects to add more monthly-bill paying wireless subscribers in 2025 than the around 900,000 it added last year, as it benefits from its customizable myPlan.
The comments follow a strong fourth quarter for U.S.
telecom firms, powered by plans that bundled 5G services with high-speed fiber data and streaming services.
LIMITED IMPACT FROM TIGHTER IMMIGRATION
Verizon and AT&T said they did not expect a big hit from tighter U.S.
immigration policies.
Since taking office in January, President Donald Trump has kicked off a sweeping immigration crackdown, tasking the U.S. military with aiding border security and issuing a broad ban on asylum.
That has raised worries that the pool of new customers for telecom companies could shrink.
“We expect very limited impact on postpaid where customers have got to provide some form of identification to get onto a contract.
If there is any impact, we will see it towards the low end of the prepaid market,” Verizon’s Boulben said.
AT&T and Verizon also played down worries about competition from satellite internet providers such as SpaceX’s Starlink, saying that wireless was more reliable and cost-effective.
“It (direct satellite connectivity) makes all the sense in the world. But it’s not an enormous business opportunity today,” AT&T CFO Pascal Desroches said.
T-Mobile last month said it would launch its satellite-to-cell service, powered by SpaceX’s Starlink, in July for $15 a month.
(Reporting by Priyanka.G and Harshita Varghese in Bengaluru; Editing by Leroy Leo, Sriraj Kalluvila and Alan Barona)
