As investors brace for a potential economic downturn, AT&T (T) is monitoring one barometer of consumer health: whether subscribers are able to pay their phone bills on time.
"In terms of overall delinquencies, and I’ve been saying this since the spring, we are probably slightly worse than pre-pandemic norms," AT&T Chief Financial Officer Pascal Desroches told Yahoo Finance Live (video above). "But all in all, really strong fundamentals."
The CFO expressed confidence in the company's ability to offset any impact on its business stemming from rising delinquencies or subscribers "trading down" their service. Even if consumers decide to cut some spending in a more challenging economic climate, Desroches noted they probably won’t cut out their phones.
"When you look back at history, even in downturns the telecommunications sector tends to be more resilient than most," Desroches said. "Clearly, we would be impacted like others but not nearly to the same extent. Right now when you look at the criticality of telecommunications — whether wireless or broadband — that’s one of the last things the consumer would turn off even in a challenging economic environment."
During its fiscal third quarter, AT&T added 708,000 postpaid phone subscribers and an average revenue per user (ARPU) of $55.67, which represents growth of 2.4% versus the same quarter the year prior.
According to Desroches, that growth has been partly driven by consumer resiliency, particularly among more affluent households.
"More consumers are opting for the higher priced plan, and that’s part of what’s driving the growth in our ARPU that we reported," the CFO said.
Telecommunications companies like AT&T are also watching other factors critical to growth, such as device upgrade cycles and network reliability.
As it relates to smartphone sales, tech behemoth Apple (AAPL) has reportedly already adjusted its forecast for iPhone demand and rolled back production on its iPhone 14 Plus. The decision from one of the world's largest smartphone manufacturers cast a spotlight on a potentially weak upgrade cycle.
Still, Desroches remained optimistic about the outlook for AT&T into 2023.
"Our business has a history of performing well even in challenging economic times, and we don’t expect this time to be any different," Desroches said.
Brad Smith is an anchor at Yahoo Finance. Follow him on Twitter @thebradsmith.
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