- Wireless carrier stocks followed the rest of the market into negative territory
- Tariffs will push equipment costs higher, but carriers are expected to stick with their current capex plans
- For new and smaller open RAN vendors, tariffs can only spell higher costs, further inhibiting growth
Shares in U.S. communications service providers (CSPs) were down across the board on Friday after President Trump’s new tariffs hammered stocks for a second day in a row.
Shares in AT&T, T-Mobile and Verizon each were down 5%-7%. Ericsson and Nokia shares were down 6% and 4%, respectively. Shares in public tower companies American Tower, Crown Castle and SBA Communications were down from 3% to 5% Friday after remaining relatively unscathed on Thursday.
Clearly, Apple took the brunt of the blows, losing over $300 billion in market value on Thursday alone. Most iPhones are made in China, the target of a 54% tariff, which could bump the price of an iPhone to a whopping $2,300 by some estimates.
The Nasdaq composite index, where most technology companies trade, was down 5.8% at the close of the week.
“Everybody is down a little bit today. If you’re down 2%, you’re a winner” in today’s market, quipped industry analyst Roger Entner on Friday.
The stocks of service providers AT&T, T-Mobile and Verizon were more or less intact compared to the big hardware players in part because their emphasis on service revenue insulates them somewhat, noted Counterpoint Research analyst Maurice Klaehne.
But all three have implemented price increases on legacy service plans this year and he expects price adjustments will to continue in 2025, tariffs or no tariffs.
New Street Research stock analyst Jonathan Chaplin said in a report for investors Friday that the U.S. wireless, cable and fiber companies under his watch are likely to be a safe haven as the broader market wrestles with tariff impacts.
“Tariffs will push equipment costs higher,” threatening capex and free cash flow. However, “carriers are likely to slow deployment to preserve the current trajectories of dividends and repurchases,” he said, acknowledging that tariff wars may trigger a recession.
About one-third of capex at wireless carriers is equipment, and the vast majority of this will come from South Korea and Western Europe, incurring tariffs of 15%-25%, according to the New Street report. Assuming no change in pace of deployment or of vendors, that would drive wireless capex budgets up by 7%.
But New Street expects carrier capex won’t change for 2025 because carriers will have equipment in inventory and if equipment costs go up, carriers are most likely going to delay deployments rather than pay more for new gear.
Device payment plans likely extended
To be sure, the new tariffs will drive up the costs of all handsets, not just iPhones, and wireless carriers are unlikely to eat those costs. Assuming there’s no near-term deal to resolve the tariff issue, one tactic that carriers are quite possibly going to look at is extending their device payment programs.
Right now, if a consumer doesn’t pay full price at the outset, the standard time to pay off a handset is three years at AT&T and Verizon and two years at T-Mobile, said Wave7 Research principal Jeff Moore. But if tariffs increase carriers’ costs for handsets, they might extend those installment payment plans. “There are different ways that carriers could handle that,” Moore said.
It’s worth noting that phone subsidies still exist. All the big wireless carriers subsidize phones, a practice that has endured since the early days of the industry, even though carrier execs complained loud and often about the practice. Subsidies died in the 2013 timeframe when T-Mobile introduced no-contract plans, but they crept back after the introduction of the “best deal for everyone” offers that originated at AT&T, Entner said.
More uncertainty for open RAN
For the carriers’ equipment vendors, they’re going to feel the effects of the tariffs, although Ericsson and Nokia will be shielded to some degree because they have both established a U.S. manufacturing presence.
It’s a different story for the emerging open RAN sector, which is all about providing choice in RAN equipment rather than forcing carriers to buy all their gear from a Nokia or Ericsson. For open RAN vendors in the U.S., it’s challenging to supply a 5G radio network without components from overseas.
For vendors trying to get into the RAN market via open RAN, their costs are going up. “I don’t know how we're going to build a sub $1,000 radio with what's going on. It’s an inhibitor to the whole low cost 5G space, private 5G space,” said Thomas Nadeau, Workstream co-chair at the Open Compute Project working on the Evenstar 5G open radio unit platform.
“That's definitely going to impact adoption,” he said. Besides low power, the predominant business case here is lower prices compared to incumbent radio vendors.
“I don't know how that's going to shake out, but it doesn't sound good to me. It’s very unknown and seems to me the impacts are not going to be positive,” he concluded.