The news: AT&T and Verizon said they will pass any tariff-related costs onto consumers.

• AT&T CEO John Stankey said during the company’s Q1 earnings call that end users will have to “digest” handset price hikes.
• On Verizon’s Q1 earnings call, CEO Hans Vestberg said that if tariffs are “as high as they say” on handsets, expenses won’t be covered by the company and will hit consumers.

AT&T gained 324,000 phone subscribers in Q1, while Verizon lost 289,000.

Insulated from losses: Telecom carriers will generally be less affected by tariffs than manufacturers since their core businesses rely on subscription services. In Q1, 83.9% of Verizon’s operating revenues and 77.2% of AT&T’s came from services.

Lower consumer spending could still have an impact if subscribers decide to cancel add-ons like hotspot access or device insurance. And that’s already happening: 46% of US adults canceled or downgraded subscriptions in February to decrease their spending, per CivicScience.

Device declines: Despite the companies’ business models being largely based on services, many consumers buy devices and phones through their carriers to finance them. That activity may scale back ahead of tariff-led price hikes.

• For big-ticket items over $500, 27% of US adults are delaying purchases, per CNET. Only 5% plan to finance non-essential items—like electronics—without intending to immediately pay them back.
• In addition to this, consumers don’t frequently upgrade their smartphones. Any panic-buying sprees will likely die down in the next quarter.

Our take: Telecoms and other service providers should double down on customer retention efforts, such as loyalty perks and bundling deals, to reduce churn. With device sales likely to dip ahead of potential rising costs and declining consumer spending, recurring services will be a crucial area for growth.

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