AT&T and Verizon took a beating after their second quarter earnings reports. Of course, the U.S. stock market, as a whole, has been taking a beating, as well.
Since the last quarter, AT&T’s stock is down 21%, and Verizon’s is down 17%. The S&P, itself, is down 7% since July 19 just before Q2 2022 earnings.
However, T-Mobile had a great Q2, and its stock is up 4%. T-Mobile management has also claimed that the switcher pool is up.
Recon Analytics principal Roger Entner has some data to support the claim that the pool of potential wireless subscribers has risen. The data shows that more young children are being given smartphones by their parents in the aftermath of the mass school shooting in Uvalde, Texas.
Recon Analytics conducted a survey in March that found 15% of American 6-year-olds had a cell phone. The analyst group conducted the same survey at the end of August, and that percentage had shot up to 33% of 6-year-olds.
“That alone is like 600,000 kids,” said Entner. “It’s called Uvalde. The police didn’t let worried parents know if their children were dead or alive."
Entner added, "We also asked who would get their kid a cellphone by the end of the year, and that number goes up by 50%. And this is the more budget-minded segment and before the iPhone launch.”
Key topics in Q3
Aside from the interest in total subscriber numbers, the analysts at Cowen, led by Gregory Williams, have enumerated some other key topics to expect from the third quarter reports, which kick off later this week with Verizon’s and AT&T’s earnings calls. Some of topics will probably be:
- Inflation and how it’s affecting subscriber growth
- Discounts and promotions of the iPhone 14
- Fixed Wireless Access (FWA)
All three major U.S. carriers have implemented various price hikes, whether transparent or as part of “administrative fees” or new phone set-up charges. The carriers have increased prices to protect their margins from inflation. It will be interesting to see if these changes have increased churn and which carriers are hurt or helped from the churn.
Verizon has already said that consumer phone losses will continue in Q3. “Since the last print, Verizon has introduced lower-end plans including Verizon Welcome and a reinvigorated prepaid with the “Total by Verizon” brand to compete with Metro and Cricket down-market, especially important in this more challenged economy,” writes Cowen.
Analysts are likely to ask AT&T about its amortization of phone subsidies and why it’s just pushing the cost of those subsidies down the road. Also, during the last quarter, AT&T mentioned that subscribers were taking a little longer to pay their bills. So, company execs are likely to be asked about that again.
At the same time the carriers are raising some prices, they’re also offering discounts on the iPhone 14. Analysts will ask about the response to those discounts.
Somewhat related to that, T-Mobile has been ramping its efforts to market its network to emergency responders and to seniors age 55+ It might be asked to quantify the value of those efforts and whether discounts are driving more interest.
FWA
For Q3 Cowen is expecting hefty FWA adds for both T-Mobile and Verizon. In the second quarter, T-Mobile noted about two-thirds of its FWA subs were coming from suburban areas. But that could change as capacity fills up in more dense areas and the carriers pivot their FWA marketing to rural locales.
Both T-Mobile and Verizon have set ambitious targets for their FWA offerings, seeking to reach 7-8 million and 4-5 million subs by 2025, respectively. But analysts are skeptical about the long-term sustainability of FWA adds.