AT&T’s fourth-quarter wireless subscriber growth and its free cash flow target lagged well behind analyst estimates, sending its shares down 2 percent in late trading Tuesday.

Chief executive Randall Stephenson also told investors on the company’s conference call that a U.S. spying scandal was hurting its business.

With a price war brewing and market-share losses to smaller rival T-Mobile USA and market leader Verizon Wireless, some investors want AT&T to expand overseas with an acquisition of Vodafone Group though it has ruled out such a deal for now.

AT&T added fuel to investor worries with a free cash flow target of $11 billion for 2014 and 2015, down from $13.6 billion in 2013. That implies that a “nerve-wracking” 86 percent of its cash flow will be needed for paying dividends, according to MoffettNathanson analyst Craig Moffett.

“That doesn’t leave much room for a price war,” Moffett said in a research note. “AT&T may or may not return to Vodafone in the second half, but they need to do . . . something.”

On top of financial concerns, investors are worried about whether competition will become more intense as T-Mobile has been directly marketing to AT&T customers, and AT&T recently offered to pay T-Mobile customers to switch.

For the fourth quarter, AT&T had subscriber net additions of 566,000, behind the average Wall Street expectation for 636,000, according to eight analysts contacted by Reuters.

It also trailed market leader Verizon Wireless, which had 1.6 million subscriber additions, and T-Mobile, which had 869,000.

While AT&T executives spoke of intense competition on the quarterly conference call, they said their customer defection rate, known in the industry as churn, was their best ever for the fourth quarter and showed that they were holding their own.

While the bulk of AT&T’s business is domestic, Stephenson noted for the first time on Tuesday that his company was being hurt by revelations from former NSA contractor Edward Snowden of a widespread U.S. surveillance program that used records of communications on networks including that of AT&T.

U.S. equipment maker Cisco Systems recently blamed the revelations for a loss of business in China.

Stephenson said he had discussed the matter with European policy makers at the World Economic Forum in Switzerland last week as the NSA fallout was “not inconsequential” to AT&T.

Although he did not quantify the financial impact of the NSA issue, Stephenson said: “We are having customers ask us a lot of questions.”

“We’ve had some business impacts from the NSA,” Stephenson told investors during the company’s quarterly earnings call.

AT&T reported fourth-quarter earnings of $6.9 billion, compared with a loss of $3.86 billion in the year-ago quarter when it had a large actuarial charge. Revenue rose to $33.16 billion from $32.58 billion.

— Reuters