(Bloomberg) – Verizon Communications Inc. reported a larger-than-expected decline in mobile phone subscribers in the first quarter, as a result of competitive competition and reduced spending on government agencies.
The largest wireless provider in the U.S. recorded losses of 289,000 monthly phone subscribers, with analysts’ average estimated 185,500 losses, according to a statement Tuesday. This is a significant reversal from the 568,000 subscribers added in the fourth quarter, more than double the decline recorded at the same time last year. Verizon attributes the reduction in some federal agencies to the Trump administration’s cuts of thousands of jobs.
“We see some of the impact of the new administration and its efficiency efforts,” CEO Hans Vestberg told analysts over the phone.
Verizon, AT&T Inc. and T-Mobile US Inc. are locked in a tight race to win customers in a saturated market. Last month, Verizon chief revenue officer Frank Boulben warned that subscriber numbers “could be softer” due to “higher levels of competition intensity.” He said Verizon ended the seasonal promotion after the Christmas holiday, while rivals did not. Customers also keep their phones for longer.
The company has increased monthly rates and fees over the past few years to boost revenue, which has changed little over the past five quarters. To attract new subscribers and prevent existing customers from leaving, Verizon has pledged a three-year price guarantee this month and conducts mobile transactions on mobile phones and home internet plans for free.
Chief Financial Officer Tony Skiadas told analysts Tuesday that the net loss for the quarter “reflects the impact of recent pricing actions,” but he said the company remains “with positive momentum out of the first quarter.”
If the price of mobile phones rises in the coming months based on President Donald Trump’s tariffs on U.S. imports, Westerberg said consumers will be the consumers who pay the price.
“We will continue to be financially disciplined in any promotions we have, but we will not be responsible for any huge cell phone tariffs,” Vestberg told analysts during the call. “This will eventually be passed on to consumers.”
Bloomberg Intelligence said Verizon and its peers were “majorly overshadowed by its focus and utility model” and that was related to the negative effects of tariffs. Analysts write that these companies may experience long-term effects, such as downgrading customers from advanced phone plans.
In the shorter term, the two companies will see “stable phone replacement rates as consumers buy phones ahead of tariffs,” Roger Entner, an analyst at Scout Analytics, said in an email. Verizon did not record earnings from device sales in the first quarter, but expects interest rates to rise later this year.
Sowmyanarayan Sampath, head of consumer division at Verizon, said the decline in immigration rates did not delay sales, which usually drives part of the growth of new customers, which did not delay sales, partly because prepaid customers are upgrading to more advanced programs. “We are getting a premium end of prepaid, which is why we are still seeing great performance despite the low immigration of these segments,” he said.
Operating revenue increased to $33.5 billion in the first quarter, up from the estimated average of $33.3 billion. Adjusted revenue was $1.19 per share, surpassing the forecast at a price of $1.15. The company reiterated all guidance for the year, including a 2% to 3.5% increase before interest, taxes, depreciation and amortization.
Vestberg noted that the adjusted EBITDA of $12.6 billion in the first quarter was the company’s “highest result ever.”
Broadband remains the company’s highlight, with Verizon adding 339,000 Internet customers. Verizon and its peers expelled the cable company’s market share by providing fiber-connected and home wireless services powered by 5G networks and bundled with their mobile plans and content packages.
Verizon is the first of the three largest telecom companies in the United States to report first-quarter results. AT&T was released on Wednesday, followed by T-Mobile on Thursday. Verizon shared a 1.8% decline in New York Tuesday morning.
– Assistance by Keith Gerstein.
(Correction of EPS number in paragraph 12.)
More stories like this are available Bloomberg.com
