- AT&T cuts its annual cash flow forecast.
- Service disconnection orders and customer bill payment delays are the main cause of the decline
- Shares of companies in the same sector are also trading lower.
AT&T has cut its annual free cash flow forecast by $2 billion. Its shares fell as much as -11% on Thursday, although it has been reducing the loss over the course of the trading session.
The telecommunications company is going through a possible slowdown in customer consumption, the same situation that other companies in the same sector are going through. The four-decade record inflation is causing many customers to opt out of their services or fall behind in paying their bills.
AT&T, like other companies, has increased its prices in order to meet the increase in input costs. This caused the century-old company to lower its forecast.
“A more moderate economic climate in the second half of the year has led us to adjust our cash flow expectations,” said CEO John Stankey. “We don’t view this cycle any differently and still expect customers to pay their bills, albeit a little less on time” remarked Starkey.
The report of AT&T’s forecast cut initiated a contagion effect on shares of rivals Verizon Communicatios and T-Mobile US which also opened lower on Thursday.
Rising inflation has also prompted other companies such as Netflix to announce cheaper plans with advertising in order to win back customers.
AT&T forecasts full-year free cash flow of about $14 billion, down from its previous forecast of about $16 billion.
It gained more than 800,000 monthly bill-paying wireless subscribers and 316,000 new broadband customers in the quarter ended June 30. This raises the growth forecast for its annual wireless revenue.
The company had total revenue of $29.6 billion, which was in line with market estimates of $29.55 billion. It earned 65 cents per share, also beating projections of 61 cents per share.