Mobile Phone Shipments Predicted to Decline
Last week, Reuters, an international news organization, reported that multinational e-commerce tech company, Amazon may be working towards becoming the fourth U.S. wireless carrier. Amazon first entered the picture as a potential buyer of Boost Mobile after Sprint announced that it would be selling the prepaid plan as a condition to gain approval for the T-Mobile-Sprint merger from the Federal Communications Commission (FCC). Additionally, T-Mobile and Sprint received recommendation from the Department of Justice that the carriers lay the groundwork for an entirely new carrier to emerge from their deal to be approved. However, while Amazon’s interest in buying Boost Mobile may help push through the stalled $26 billion T-Mobile-Sprint merger, it may not be the boon that the telecom carriers had in mind.
While Amazon has neither confirmed or denied the reports, Reuter’s report indicates that the e-commerce giant’s interest in Boost Mobile is centered on access to use the new T-Mobile wireless network for at least six years. Currently, Boost is valued between $3 billion and $4.5 billion and was Sprint’s only prepaid brand as a means to add new customers in 2018. Experts say that Amazon can use the Boost Mobile network to offer discounts for Prime subscribers who sign up for mobile services. Amazon is also likely to leverage the mobile spectrum, to provide connectivity to its Alexa-enabled devices and enhance its last-mile services via drone delivery, according to analysts.
Access to T-Mobile’s network would give Amazon an in-road to becoming the industry’s fourth carrier and ultimately take advantage of the next-generation of 5G networks. “The market assumes Amazon wants to become a wireless carrier itself, but that thinking is too small.
Amazon’s larger motivation could be that it expects 5G to be integral to cloud services in the future for industries like healthcare and auto, which use 5G-enabled devices,” noted Colby Synesael, senior research analyst at Cowen.
But not all analysts agree the move is a good one for the telecom industry. The prospect of Amazon entering the wireless industry is economically insane, stated Craig Moffett, analyst at MoffettNathanson, noting that the sheer costs of building a national network have already exceeded $100 billion for Verizon and AT&T in the last decade alone.
“The idea that Amazon would actually want to enter the wireless market is bad enough,” Moffett said. “Over its now forty-year history, the wireless industry has never generated a return on invested capital meaningfully in excess of its cost of capital And that’s before the entry of a player like Amazon.” Amazon could also easily take aim at dominant telecom industry players AT&T and Verizon, analysts say.
Two of the other companies dominating the internet, Google and Facebook, have both pursued their own internet delivery schemes over the years. So why not Amazon, particularly if it can get a good deal from two carriers that are desperate to merge?
And while it wouldn’t require Amazon to create a wireless carrier, it’s worth noting that Amazon once had ambitions to sell phones as the ultimate human touchpoint for all its consumer services, and now wouldn’t be the worst time to try entering the mobile telecom market again, especially seeing as how an EU ruling late last year makes it a lot easier for smartphone makers to sell Android devices without Google’s buy-in, at least in Europe. A wireless network might just be what Amazon needs to gain more leverage in the U.S.
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