Wolfe downgrades AT&T amid a wait and see approach

Investing.com -- Wolfe Research on Monday downgraded the U.S. telecom sector to Market Weight, noting that the industry is entering a more challenging phase after a disappointing 2025.

The broker said churn and upgrade trends moved in the wrong direction this year, while average revenue per user (ARPU) outlooks for 2026 have softened, undermining a key pillar of the bullish telecom narrative.

After what Wolfe described as a “bruising” second half of 2025, analysts led by Peter Supino said they see little reason for trends to reverse.

Churn rose despite the normalization of equipment installment plan expirations, and upgrade rates rebounded after several years of decline. Those pressures have emerged just as service price increases since 2022 appear to be weighing more heavily on customer behavior.

Looking ahead, Wolfe expects 2026 to be shaped by a potential competitive reset led by Verizon, higher spectrum-related costs, and the introduction of a foldable iPhone, which could reignite subsidy intensity.

“We generally don't sensationalize mobile product cycles as relates to telecom upgrade risks, but the foldable iPhone stands to be the first significant iPhone form factor change in a very long time,” the analysts said.

The team warned that a more aggressive promotional environment could pressure industry profitability even if subscriber growth remains solid.

Within that backdrop, Wolfe downgraded AT&T to Peer Perform from Outperform, adopting what it called a “wait and see” approach.

While the analysts still view AT&T as a multi-year strategic winner, they flagged rising near-term risks tied to shifting competitive dynamics.

They argue that changes in pricing and promotions could weigh on postpaid phone ARPU growth in 2026, which Wolfe estimates at just 0.3% year over year, and potentially on subscriber growth as well.

This, in turn, creates “ modest risk to the EBITDA/EPS consensus,” the analysts added.

Meanwhile, Wolfe remains more constructive tone on T-Mobile, saying it should be relatively better positioned if subscriber switching accelerates.

As the mobile value leader, the analysts expect T-Mobile to benefit when customers change carriers, with less aggressive net add guidance in 2026 potentially supporting operating expense tailwinds.

They also pointed to several greenfield opportunities, including T-Ads, satellite, fiber and U.S. Cellular, which it said could offer scope for positive estimate revisions.

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