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Why the government stimulus will reduce wireless bill delinquency – Business Insider UK


The government stimulus checks that would reach millions of US households on final passage of the Act will help reduce the rate of late or delinquent wireless bills, helping to stabilize cash flows for network operators in a time of uncertainty.

How US households would spend $1,000 government stimulus payment



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Delinquency rates for wireless bills will likely spike in coming weeks regardless, as unemployment claims skyrocket nationwide — last week 3 million US adults filed for unemployment benefits, the highest number of weekly claims ever released by the Labor Department. The stimulus payments are intended to ease the economic strain associated with the strict quarantine measures that have wreaked havoc on the US economy. The country’s service sector has been hit especially hard, affecting some 31.5 million people who were already working for low wages at unpredictable hours.

US households’ top priority for stimulus funds would be to pay bills, and we think they’ll prioritize wireless bills due to the heightened need for connectivity under quarantine. When asked what they would do with a $1,000 payment from the US government, US adults most often cited paying bills (36%), which took precedence over buying essentials such as food and hygiene products (21%) and putting the money toward savings (17%), according to a survey released this week by YouGov.

This prioritization was even more pronounced in lower-income groups: 42% of respondents earning less than $40,000 annually said they would use the money to pay bills, compared with 36% of those who make $40,000-$80,000, and 25% of those who earn more than $80,000. Wireless bills will likely be among the highest priorities for US households, as quarantine measures have caused essential facets of daily life such as worksocializationtelemedicine, and school to shift online. 

The finding that US adults are keeping household bills top of mind should help wireless carriers stabilize cash flow in a time of great uncertainty. While US consumers may prioritize paying their bills, they will likely cut back on discretionary purchases like upgrading their smartphones or subscribing to video streaming services.

As these revenue streams dry up, the continuous cash flows generated from wireless bills will become even more critical to the financial health of carriers. In particular, these cash flows will help carriers to ensure that the considerable debt on their balance sheets — incurred at a time when the very notion of a nationwide economic shutdown seemed almost unimaginable — remains in check. Still, a one-time payment of the base amount — $1,200 for each eligible individual — will not be enough to sustain most households through a prolonged period of unemployment, and wireless carriers should look to refinance or restructure debts in preparation for potentially greater economic upheaval.

Business Insider Intelligence is working hard to provide you with the latest data and our most up-to-date thinking on how the coronavirus pandemic will impact your industry, and what you can do to stay ahead. Read all of our coronavirus coverage on Business Insider Intelligence>> (Enterprise subscription required)

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