AMZN Stock: Possible Amazon Entry into Wireless Services Lowers Telecom Stocks

Telecom stocks fell on Friday on new reports that the e-commerce giant Amazon.co.uk (AMZN) plans to sell mobile phone services in the United States through its Prime loyalty program. AT&T (T), Verizon Communications (VZ) and T-Mobile United States (TMUS) all slipped on the news, but Dish Network (DISH) and AMZN stocks gained ground.




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Reports that Amazon may be teaming up with satellite TV broadcaster Dish surfaced a week ago. These reports indicated that Dish would be selling its Boost Mobile Wireless prepaid plans through Amazon. Dish is a relative newcomer to the wireless phone market.

What’s new in Friday’s reports, originating from Bloomberg, is that Amazon may be launching its own program through Prime. Additionally, Amazon may partner with other wireless companies.

Additionally, Amazon aims to get the lowest wholesale prices possible. The e-commerce giant could offer Prime members wireless plans for $10 a month or even free, Bloomberg said.

At RBC Capital, analyst Brad Erikson is skeptical of a deal.

“While the conceptual logic is obvious given that there are more Prime memberships than the total number of U.S. households, we see barriers to this type of deal,” he said in a memo to reporters. clients. “We are struggling to determine where AMZN’s price leverage would come from compared to the (wireless) carriers. Clearly, the carriers won’t make an unprofitable deal. ‘AMZN with investors to structure an incremental and even slightly irrational deal for services through Prime would make no sense given the broader push to improve U.S. retail.’

Telecom stocks lag, AMZN stocks gain

AMZN stock rose 1.5% to 124.61 while T stock fell 4.4% to 15.11 in the stock market today. Meanwhile, VZ stock fell 4% to 34.30. Additionally, TMUS stock fell 7.8% to near 128. Dish stock jumped 22% to 7.66.

With the exception of T-Mobile, telecommunications stocks have been hit hard this year amid weak wireless revenue growth. AMZN stock, however, gained 49%.

When reports of an Amazon-Dish surfaced a week ago, analysts said it could cause problems for incumbents, depending on the structure.

“Amazon currently sells wireless services from prepaid providers like Cricket (owned by AT&T), Simple Mobile and Tracfone (owned by Verizon) where Amazon potentially takes a slice of the economy,” said UBS analyst John Hodulik. in a note to customers.

He added: “We believe that such a distribution agreement could help DISH attract subscribers, but it is unlikely to result in a significant change in industry competition in the absence of attractive promotions on the handsets. We think a bigger risk to 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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