It's far from certain at this point that Amazon.com (AMZN) will actually become a U.S. mobile carrier, and any major effort in this direction would undoubtedly be costly.
But it's hard to blame Amazon for exploring the idea, given how such a move could strengthen Amazon's ties with U.S. consumers as well as how asset sales tied to a potential T-Mobile US (TMUS) /Sprint (S) deal could present a unique opportunity to become a meaningful player in a U.S. mobile industry that hasn't seen a major new player emerge in a long time.
Not long after Bloomberg reported that T-Mobile and Sprint are offering to unload both Sprint's Boost Mobile prepaid wireless brand and certain spectrum assets to secure DOJ approval for their planned merger, Reuters reported that Amazon is thinking about buying Boost and "would also be interested in any wireless spectrum that could be divested." It added that Amazon is interested in Boost because a deal to buy it would enable the use of T-Mobile's wireless network for at least 6 years on a wholesale (MVNO) basis.
Comcast (CMCSA) and Charter (CHTR) , each of which currently provide MVNO services with the help of Verizon's (VZ) network, were previously reported to have interest in the spectrum T-Mobile and Sprint are willing to unload. However, Comcast said on Friday that it has no interest in the assets, and a source told CNBC the cable giant also isn't interested in Boost.
Continuing a longstanding trend of companies selling off on worries about Amazon encroaching on their turf, AT&T (T) and Verizon each fell about 4% in Friday trading amid a 1.3% decline for the S&P 500. On the flip side, cell tower owners American Tower (AMT) , Crown Castle (CCI) and SBA Communications (SBAC) rallied.
It's worth keeping in mind here that not every report about Amazon looking to make a big splash in a market where it has little or no presence has been followed by Amazon actually making such a move.
Last fall, the company was reported to have bid for the 22 regional sports networks (RSNs) that Disney (DIS) had agreed to sell to get regulatory approval for its acquisition of much of Fox Networks. However, Amazon ultimately settled for a minority stake in one of those RSNs -- the YES Network, which has regional broadcast rights for New York Yankees and Brooklyn Nets games.
But if Amazon does actually acquire Boost Mobile, spectrum and multi-year MVNO rights from T-Mobile, there are plenty of uses that it could find for a nationwide wireless service, all while advertising it for free to its giant customer base. Possibilities include:
- Discounted service plans for Amazon Prime members. With Amazon a month removed from announcing it aims to make 1-day shipping the norm for Prime in the U.S. and elsewhere, the company seems eager to find new ways to grow Prime sign-ups, retention and engagement -- and by doing so, also grow Prime's long-term pricing power. In addition, buying a service such as Boost could strengthen Amazon's push to grow Prime sign-ups among lower-income consumers.
- The pre-installing of Amazon's apps on Android phones relying on its services (Apple (AAPL) won't allow iPhone pre-installs). And for both iOS and Android devices, Amazon could exclude any data consumed by its apps from mobile data caps.
- Strengthening Amazon's U.S. ad business by obtaining additional user data that could be leveraged for ad targeting. At various times, Verizon and AT&T have both talked up their ability to leverage provided by their telecom and pay-TV services to grow online and mobile ad sales.
- IoT connectivity services for AWS clients. These could be bundled with AWS' existing services for deploying, managing and analyzing the data produced by IoT devices.
Judging by the company's reported interest in buying spectrum assets, Amazon is intrigued enough by the possibilities opened up from being a wireless service provider to want to eventually build its own network. This would represent a far more costly and capital-intensive strategy than simply being an MVNO, but also one that could position Amazon better for long-term success, given that it wouldn't have to pay a margin to T-Mobile or another carrier, nor be subject to their whims on pricing and other matters.
If Amazon went down this path, it's possible that the spectrum that T-Mobile and Sprint are offering to sell won't be enough for its needs; CNBC, it should be noted, said Comcast doesn't think the spectrum is enough to create a fourth nationwide carrier. But Amazon could pair these assets with some of those owned by a company like Dish Network (DISH) , which has amassed a giant spectrum hoard over the years.
Investing many billions to become a major U.S. mobile carrier would represent quite the gamble for Amazon. But this is, after all, a company that has invested many billions in a streaming video service that it chose to bundle with an online shipping service. Big bets founded on out-of-the-box thinking are very much the norm for Jeff Bezos & Co.
