It appears that job cuts by the federal government are now showing up on corporate balance sheets.
Verizon lost 289,000 monthly phone subscribers in the first quarter, the telecom company said in its earnings report released Tuesday. That’s more than double the decline from the same period a year ago. On its earnings call, the company attributed the decline — at least in part — to a loss of business from the federal government.
If you don’t have a government job, you don’t have a government-issued phone.
“DOGE [Department of Government Efficiency] has had its impact, right?” said Roger Entner with Recon Analytics, which counts Verizon as a customer. “They have laid off a lot of government employees. They have canceled contracts.”
He said the federal government is a substantial client for the telecom. Since there are fewer government workers now, “Verizon will feel the pinch,” along with other telecoms with federal contracts, Entner said.
It might not just be the federal government that’s paring back. Craig Moffett, senior analyst and founder at the research firm MoffettNathanson, said if the stock market continues to falter and the economy slows, that could mean fewer new businesses and fewer new business telephone lines.
Also, families could hold off getting the kids phones.
“Instead of getting a child a phone when they're 10 years old, they'll wait until the child is 11, or something like that,” said Moffett.
Moffett is also watching to see how a tightening in immigration policy will affect the industry. He said if fewer people are allowed into the country, or more are deported, “it's inevitably going to have an impact on subscriptions.”
Moffett said an immigration crackdown could also lead more customers to choose prepaid subscriptions as opposed to post-paid, which are billed at the end of each month.
He said post-paid customers generally pay more, but they have to provide more information.
“If individuals are afraid to apply for post-paid service because they don't want to give their Social Security number, for example … they're more likely to use prepaid service that can be to a much greater extent anonymous,” said Moffett.
Despite these possible hits to subscription numbers, the telecom industry overall is fairly recession-proof, according to Recon Analytics’ Roger Entner. That’s because Americans rely on good communications.
“All these telecom providers are supertankers,” said Entner. “When they go in rough seas, they will be fine.”
He said there are other companies that get all their revenue from the federal government, like some consulting firms. He said they are not supertankers, and the waves hitting them are a lot bigger.
