Verizon Loses Subscribers and Warns of Inflation’s Toll

The gloomier forecast came after Verizon’s postpaid phone base—a key measure of reliable customers billed for monthly service—fell by 36,000 connections in the first quarter. Rival

AT&T Inc.

on Thursday reported a net gain of 691,000 such customers over the same period, though that figure omitted some lines disconnected when the carrier shut down its 3G wireless network in February.

Shares were 6.3% lower at $51.55 in early-afternoon trading amid Friday’s broader market selloff. The stock is down about 11% over the past 12 months.

Wireless companies have posted above-average subscriber growth for most of the past two years, raising questions among analysts and investors about the sustainability of network operators’ financial performance.

T-Mobile US Inc.

TMUS -2.63%

is slated to report its first-quarter results next week.

Verizon Chief Financial Officer

Matt Ellis

said Friday that rising interest rates could push up the company’s cash interest costs on outstanding debt by another $150 million to $200 million. He also said worker wages, contractor prices, electricity prices and fuel costs all factored into the carrier’s financial projections, though it is too soon to tell whether the company would pass on those higher costs to customers.

“We’re at inflation levels that we’ve not been at for 40 years and the wireless industry hasn’t existed for 40 years,” Mr. Ellis said in an interview. “But many other industries have obviously been here…and competitive industries can still pass on price increases.”

In the March quarter, net income attributable to Verizon fell to $4.58 billion from $5.25 billion a year earlier. The lower profit, down to $1.09 from $1.27 on a per-share basis, reflected lower revenue from wireless and broadband service and higher costs for wireless equipment such as smartphones.

Overall revenue climbed 2.1% to $33.55 billion. The recent result included sales from the November purchase of prepaid phone company TracFone but lacked revenue from online media assets such as AOL and Yahoo, which sold to private-equity firm

Apollo Global Management Inc.

APO -3.97%

around September.

Verizon remains the country’s largest mobile-service provider in terms of customers, with 91.4 million postpaid phone connections at the end of March. The company also served 23.8 million prepaid connections and continues to backstop mobile-phone service offered by large cable companies

Charter Communications Inc.

CHTR -1.48%

and

Comcast Corp.

CMCSA -3.32%

Write to Drew FitzGerald at [email protected]