(Reuters) - Verizon Communications missed quarterly revenue estimates on Monday as fewer people upgraded their phones, while its prepaid wireless subscribers fell sharply after a federal internet subsidy ended, sending its shares down more than 6%.
The telecom operator said its consumer business lost 624,000 wireless retail prepaid subscribers in the second quarter, blaming the end of the COVID-era Affordable Connectivity Program (ACP) in May for more than half of the losses.
ACP had offered internet subsidy to 23 million households in the United States who otherwise would not have been able to pay for connectivity, and now telecom carriers are bracing for a hit after it ran out.
"That (the stock move) reflects people concluding ACP impact is worse than expected. It's not just relative price, it's also relative exposure and the cable operators are significantly exposed as well," MoffettNathanson analyst Craig Moffett said.
Verizon's second-quarter revenue of $32.8 billion missed LSEG's estimate of $33.06 billion, as the company also grappled with a historically low number of people upgrading their phones.
Still, there were some positive signs for Verizon. Finance chief Tony Skiadas said on a post-earnings call the majority of disconnections due to ACP expiry had already happened, which means the impact would likely be less in the next quarter.
Analysts believe phone upgrade activity could pick up when Apple releases its latest iPhones with artificial intelligence (AI) features, later this year.
Verizon's myPlan, which was launched in May last year and allows customers to pay for only what they need, is also seeing strong adoption from customers.
It helped Verizon add 148,000 net monthly bill-paying wireless phone subscribers from April to June, above estimates of 127,870 additions, according to Visible Alpha. The company had lost 68,000 subscribers in the previous quarter.