Telecom stocks tumbled on Friday on renewed reports that e-commerce giant Amazon.com (AMZN) plans to sell mobile phone services in the U.S. through its Prime loyalty program. AT&T (T), Verizon Communications (VZ) and T-Mobile US (TMUS) all slipped on the news, but Dish Network (DISH) and AMZN stock gained ground.
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Reports that Amazon could partner with satellite TV broadcaster Dish surfaced a week ago. Those reports said Dish would sell its prepaid Boost Mobile Wireless plans through Amazon. Dish is a newcomer to the wireless phone market.
What’s new in Friday’s reports, originally from Bloomberg, is that Amazon could launch its own program through Prime. Also, Amazon may partner with other wireless firms.
Further, Amazon aims to get the lowest possible wholesale prices. The e-commerce giant could offer Prime members wireless plans for $10 a month or even for free, Bloomberg said.
At RBC Capital, analyst Brad Erikson is skeptical a deal will get done.
“While the conceptual logic is obvious given there are more Prime memberships than total U.S. households, we see impediments to this type of deal,” he said in a note to clients. “We struggle with where AMZN’s pricing leverage vs. the (wireless) carriers would come from. Obviously the carriers aren’t going to enter into an unprofitable deal. Further, AMZN’s leash with investors to structure some incremental and even slightly irrational deal for services through Prime wouldn’t make sense given the broader push towards improving U.S. retail.”
Telecom Stocks Laggards, AMZN Stock Gains
AMZN stock rose 1.5% to 124.61 while T stock fell 4.4% to 15.11 on the stock market today. Meanwhile, VZ stock retreated 4% to 34.30 Also, TMUS stock fell 7.8% to near 128. Dish stock surged 22% to 7.66.
With the exception of T-Mobile, telecom stocks have been hard hit this year amid sluggish wireless revenue growth. AMZN stock, though, has gained 49%.
When reports of an Amazon-Dish surfaced a week ago, analysts said it could spell trouble for industry incumbents, depending on the structure.
“Amazon currently sells wireless services from prepaid providers like Cricket (AT&T-owned), Simple Mobile and Tracfone (Verizon-owned) where Amazon potentially takes a cut of the economics,” UBS analyst John Hodulik said in a note to clients.
He added: “We believe such a distribution agreement could help DISH drive subscribers but it is unlikely to drive a meaningful shift in industry competition absent attractive handset promotions. We believe a bigger risk for the industry would be Amazon selling its own branded wireless service.”
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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