AT&T Inc. fell the most in more than two decades after the No. 3 U.S. wireless carrier missed analysts’ estimates for free cash flow in the first quarter and added fewer subscribers than a year earlier, signaling tight competition among rivals.

Free cash flow was US$1 billion in the period, the Dallas-based phone giant said in a statement on Thursday. That was well below the US$3.02 billion Wall Street predicted, according to a Bloomberg survey, and about 6 per cent of the US$16 billion the company expects for the year. 

The shares tumbled 10 per cent in New York, the most since December 2000. Telecom peers Verizon Communications Inc. fell 3.7 per cent and T-Mobile U.S. Inc. was down 1.9 per cent. 

The shortfall revives concerns that AT&T is struggling with high costs of phone inventory, network construction and lower contributions from its declining DirecTV joint venture. The company said it expects higher free cash flow levels in the second half of the year and is on track to meet or exceed its annual target. 

Amid stubbornly high inflation and rising interest rates, consumers are increasingly reluctant to spend more for 5G service and broadband connections. AT&T added 424,000 regular monthly phone subscribers in the first quarter, and while that exceeded the 400,556 that analysts predicted, it was almost 40 per cent fewer than the company added a year ago, fueling some concerns that the industry may be entering a slowdown after the pandemic surge. 

Since spinning off its WarnerMedia business to Discovery a year ago, AT&T has rededicated itself to connectivity, and specifically to expanding 5G wireless and fiber-optic networks. The shift in business and high levels of capital spending contributed to a surprising drop off in free cash flow last year. 

The company is continuing to persuade customers to shift to its faster fiber optic internet service, signing up 272,000 people in the first quarter even as it lost 23,000 broadband users. But that was lower than the 289,000 customers AT&T added in the same period a year ago. The company said it’s still on track to pass 30 million homes and businesses with fiber by the end of 2025.

AT&T posted earnings, excluding some items, of 60 cents a share on US$30.1 billion in sales. Analysts predicted 59 cents on revenue of US$30.3 billion.

Capital investment was US$6.4 billion in the first quarter, which includes capital expenditures and US$2.1 billion for vendor financing. Analysts predicted capex of US$5 billion in the first quarter and a US$21 billion outlay for the year. Net debt rose to US$134.7 billion from US$132.2 billion in the fourth quarter.