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Amazon's rumored entry into telecoms market has AT&T, Verizon, T-Mobile reeling

Last updated: 10:28 06 Jun 2023 EDT, First published: 15:28 05 Jun 2023 EDT

Samsung Galaxy S6 with amazon app on the screen on Wood desk office.

Amazon.com, Inc is reportedly in talks with major wireless carriers, including Verizon, T-Mobile, Dish Network (NASDAQ:DISH), and AT&T, to offer low-cost or potentially free nationwide mobile phone service to its Prime subscribers in the United States.

According to Bloomberg, the discussions have been ongoing for around two months, and Amazon is considering wireless plans priced at $10 per month or possibly for free.

For what it’s worth, Amazon has denied the plans, stating that the company currently has no intention to add mobile service to its Prime subscription.

“We are always exploring adding even more benefits for Prime members, but don’t have plans to add wireless at this time," Bradley Mattinger, an Amazon spokesperson told Proactive.

The proposed move is seen as an effort by Amazon to enhance customer loyalty among Prime subscribers. By bundling mobile service with Prime, the company aims to discourage customers from canceling and re-subscribing as needed, which it hopes could lead to long-term retention of Prime subscriptions.

Shares of Verizon, AT&T, and T-Mobile experienced a decline following the publication of Bloomberg's report last week. Verizon's stock dropped 5%, while AT&T and T-Mobile saw decreases of 5.9% and 6.8%, respectively.

Both Verizon and T-Mobile have denied being in talks with Amazon regarding the reported plans.

If Amazon were to enter the mobile service market, it would pose a threat to wireless carriers as it could potentially lure away their existing customers. However, Bloomberg notes that carriers may be hesitant to reject Amazon's proposition, considering their substantial investments in 5G networks and the need to generate returns on those investments.

That might not apply to one, however: analysts at UBS believe that Dish Network (NASDAQ:DISH) could be a potential candidate for a deal, given its early development stage and limited presence in postpaid wireless. DISH shares saw a bounce of 3.5% on Friday following the report.

“Given the impact the cable MVNO (Mobile Virtual Network Operator) is having on the wireless industry and valuation/multiples (as well as the hit the stocks recently saw when headlines first emerged about Amazon adding Boost to its prepaid line-up), we are skeptical the incumbents would be willing to offer wholesale capacity to Amazon,” UBS analysts wrote.

“Such a deal would drive wholesale revenue but dramatically increase competition in the industry, put fundamentals at risk and pressure multiples. We believe DISH is the only candidate potentially willing to agree to such a deal given its early stage of development and essentially zero presence in postpaid wireless currently.”

DISH is unable to resell its MVNO access to T-Mobile and AT&T's networks and its own network will take years of development and $10 billion in additional investment before it can service retail customers on a stand-alone basis, without actually increasing churn in Prime subscribers, analysts noted.

UBS wondered whether Amazon would be willing to fund DISH's network build despite its position as a supplier of services to both DISH and T-Mobile.

“Absent such an investment in DISH, we believe the fears alongside these headlines are overblown and are buyers of wireless stocks on the dip.”

--Updates with Amazon spokesperson comment--

Contact Angela at angela@proactiveinvestors.com

Follow her on Twitter @AHarmantas

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