My prediction is that Amazon based in Seattle will partner with T-Mobile which is also based in Seattle.
Simple geography is drawing me to this conclusion.
The stock prices of Verizon, T-Mobile, and AT&T took a hit today following a Bloomberg report stating that Amazon is in discussions with carriers to potentially resell low-cost or free cell phone service to Prime members. Bloomberg's sources reveal that Amazon has been engaging in negotiations with Verizon, T-Mobile, and Dish Network, aiming to secure the lowest wholesale price. The report also mentions that AT&T has been involved in the discussions at certain points.
Verizon and Dish declined to comment on the matter, while AT&T explicitly stated that it is not in talks with Amazon for reselling wireless services. This isn't the first time Amazon has shown intentions to challenge wireless carriers, with its recent entry into the private wireless market. Amazon's mobile virtual network operator (MVNO) aspirations, where it utilizes a carrier's network on a wholesale basis, are often seen as a potential disruption in the wireless industry. Last month, there were reports that Dish is in talks to sell its budding phone service through Amazon, and similar discussions took place in 2017.
Amazon has provided limited information, with spokesperson Betsy Harden stating that while they are constantly exploring additional benefits for Prime members, there are no current plans to add wireless services. Following the news, Dish's stock surged over 20%, while Verizon and T-Mobile experienced declines of more than 5%, and AT&T saw a decrease of over 4%.
While the idea of Amazon purchasing wholesale and offering cheap phone service may seem daunting for carriers, selling wireless services online does not guarantee success. Recon Analytics founder and analyst Roger Entner notes that selling services online has never been a strong suit for carriers, as the experience of purchasing services on Amazon is not exceptional.
Entner further explains that while Dish is in greater need of a partner like Amazon, engaging in discussions for an MVNO deal with Dish would primarily be a courtesy call from Amazon's side. Amazon aims to reach consumers throughout the entire United States, not just the 70% of the population that Dish is required to serve with 5G by its mid-June deadline. Entner suggests that if the partnership doesn't materialize and the service quality is subpar, customers might blame Amazon rather than Dish.
Analyst Jason Leigh from IDC emphasizes that Dish needs a significant move to rectify its mobile business, as the company has lost 1.4 million subscribers since acquiring Boost as part of the T-Mobile/Sprint merger. Despite gaining subscribers through the acquisitions of Republic Wireless and Ting Mobile, Dish's subscriber trends remain challenging. Leigh suggests that Dish might be most receptive to Amazon's demands due to these circumstances, although its coverage is limited compared to other carriers, limiting its appeal.
Regarding the ongoing talks between Amazon and the carriers, the process is expected to take several more months and could potentially be abandoned, as noted in the Bloomberg report. Verizon already has a robust MVNO portfolio supporting offerings from Comcast, Charter, and Cox, while T-Mobile has experience with Altice and Google Fi. However, an Amazon Prime-driven MVNO would be on a different scale altogether.
One challenge for carriers like Verizon is the possibility of having to offer favorable terms on pricing or other aspects to win Amazon's business, which may subsequently lead to pressure to provide similar terms to their existing MVNO customers. Leigh suggests that while it may not be ideal, carriers are likely to compete for the deal to prevent their rivals from securing it.
Additionally, it's worth noting that Amazon also desires to sell cloud services to telecom companies. Engaging in competition with its own customers could lead to unfavorable outcomes, according to Entner. If Carrier X sees Amazon purchasing Carrier Y's service to rival them, it's highly likely that Carrier X will promptly cancel its contract with Amazon due to the conflict of interest.
