Verizon Loses Customers Amid End of Federal Internet Subsidy

Verizon Communications has reported disappointing quarterly revenue, falling short of estimates due to a significant drop in prepaid wireless subscribers and fewer phone upgrades. The company’s shares plummeted over 6 percent following the news, Reuters news report said.

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The telecom giant revealed that its consumer business lost 624,000 wireless retail prepaid subscribers in the second quarter. This substantial loss was largely attributed to the conclusion of the COVID-era Affordable Connectivity Program (ACP) in May, which had provided internet subsidies to 23 million U.S. households. With the end of the ACP, many households could no longer afford connectivity, leading to a sharp decline in prepaid subscriptions.

This development has sent ripples through the industry, affecting shares of other telecom operators including AT&T, T-Mobile US, Charter Communications, and Comcast, which saw their shares drop between 1.3 percent and 3 percent.

Craig Moffett, an analyst at MoffettNathanson, commented on the market reaction, stating, “The stock move reflects concerns that the impact of the ACP’s end is worse than expected. It’s not just about relative price but also relative exposure, and cable operators are significantly exposed as well.”

Verizon’s second-quarter revenue came in at $32.8 billion. The company also faced challenges with a historically low number of people upgrading their phones. Despite these setbacks, there were some positive signs. Chief Financial Officer Tony Skiadas mentioned in a post-earnings call that the majority of disconnections due to the ACP expiry had already occurred, suggesting the impact might be less severe in the next quarter.

Analysts predict that phone upgrade activity could see an uptick later this year when Apple releases its latest iPhones featuring artificial intelligence (AI) enhancements. Additionally, Verizon’s myPlan, launched in May last year, has seen strong customer adoption. This plan allows customers to pay only for what they need, which helped Verizon add 148,000 net monthly bill-paying wireless phone subscribers from April to June, surpassing estimates of 127,870 additions, according to Visible Alpha. This was a positive turnaround from the previous quarter, where the company had lost 68,000 subscribers.

While Verizon navigates these challenges, the company remains hopeful that upcoming technology releases and flexible payment plans will help stabilize and potentially grow its customer base in the coming months.

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