MoffettNathanson analyst Craig Moffett predicted price rises by Verizon and AT&T could fail to offset the impact of inflation, and could even play into the hands of rival T-Mobile US.
The analyst noted any revenue gains would be largely offset by higher costs from inflation, increased phone promotion costs and lower subscriber growth, potentially impacting AT&T and Verizon’s profitability into 2023.
“We are incrementally more pessimistic about both,” Moffett stated in a report.
Verizon increased consumer voice line fees by $1.35 per single line, business smartphone tariffs by $2.20 and basic business phone plans by $0.98. Last week it introduced a cheaper plan in an attempt to win back budget conscious customers with a no-frills package.
Welcome Unlimited costs $5 less than Verizon’s previous low-cost tariff, but doesn’t include a hotspot data feature.
In Q1, Verizon lost 36,000 post-paid customers compared with the same period of 2021.
AT&T increased prices by $6 a month for single-line customers and up to $12 a month for families for its legacy phone tariffs, and recently dropped free HBO Max streaming from its newest premium tier as it continued to reshuffle its pricing plans.
T-Mobile, Comcast and Charter Communications have not raised prices.
Moffett stated the trio will have lower profit margins going forward, but incremental share gains by the mobile operator would roughly offset the deceleration of subscriber growth.
Moffett also noted T-Mobile’s ARPU growth wouldn’t be enough to fully offset higher inflationary pressures, “but it’s close”.
“T-Mobile’s competitive positioning has only improved as Verizon and AT&T have raised prices,” Moffett stated while also noting the mobile operator could better weather inflation as the first operator to build a 5G network in the US.