By Chavi Mehta and Eva Mathews
(Reuters) – Verizon Communications Inc on Friday cut its annual profit forecast after adding fewer monthly phone subscribers than expected in the second quarter, in a sign that red-hot inflation has begun impacting its business.
Chief Executive Hans Vestberg said customer additions took a significant hit from inflation at a time when the carrier is grappling with intense competition in the U.S. telecom sector.
Verizon shares fell as much as 6% to nearly five-year low of $44.64. They closed down about 3% lower in the prior session when rival AT&T warned some of its customers were delaying bill payments. AT&T shares were trading nearly 2% lower.
U.S. companies are bracing for a slowdown in consumer spending in the second half of the year as four-decades-high inflation makes customers more price-conscious in the world’s largest economy.
“As market leader, Verizon has more to lose,” Paolo Pescatore, telecom analyst at PP Foresight said, adding it will likely be a challenging year for the company.
Verizon raised prices for its plans in June by way of additional charges, which was over and above its already pricier plans. On Friday, it warned it may need to raise prices again if costs continue to climb.
“Its bread-and-butter business is under increasing pressure,” Pescatore said.
The wireless carrier added only 12,000 net phone subscribers who pay a monthly bill in the quarter ended June 30 compared with FactSet estimates of 150,800 additions.
The company expects 2022 adjusted earnings per share in the range of $5.10 and $5.25 per share, lower than the prior outlook of $5.40 to $5.55.
Finance chief Matt Ellis said higher level of promotional activities to increase subscriber base was another reason for the cut in profit expectations.
Shares of rival T-Mobile US, which offers cheaper plans, rose nearly 1%. “T-Mobile is in pole position in appealing to cost-conscious customers. Others are playing catch-up,” analyst Pescatore said.
(Reporting by Chavi Mehta and Eva Mathews in Bengaluru; Editing by Arun Koyyur)
