Despite a news report that Amazon is in talks with wireless providers about offering a free service to Prime members, telecom financial analysts at SVB MoffettNathanson say “Don’t bet on it.”
A deal with Amazon would essentially be “letting the fox into the hen house,” the analysts said.
According to the news report, published by Bloomberg and based on conversations with several sources familiar with the situation, Amazon has had discussions with AT&T, Dish, T-Mobile and Verizon about a possible deal and is in negotiations with all but AT&T, although everyone but Dish has denied it. In addition, an Amazon spokesperson told Bloomberg that the company doesn’t have plans to add wireless at this time.
Perhaps negotiations failed. And according to MoffettNathanson, that’s a good thing for all concerned, except possibly Dish.
Dish would love to have the business for its fledgling wireless network, but Amazon would be unwise to make a deal with Dish, the analysts said.
The Dish network is believed to have reached its required milestone of covering 70% of the U.S. population, according to MoffettNathanson. But although the company has deals to use AT&T and T-Mobile to cover other areas, Dish is not allowed to use those networks to support third-party services, the analysts said.
Considering that, Amazon may be unlikely to strike a deal with Dish.
Meanwhile, the other three wireless providers are unlikely to want to make a deal with Amazon because Amazon poses a substantial competitive threat—even if the service isn’t free with a Prime membership but instead is a discounted offering.
MoffettNathanson questions whether Amazon would offer wireless service for free, considering that the wholesale cost of free service would likely be about $240 a year and Prime only costs $139 a year. Instead, Amazon more likely would offer a discounted service. But even under that scenario, MoffettNathanson estimates that Amazon could gain about six million wireless subscribers in a two-year period.
There is another important factor to consider, however, and that’s regulators. The analysts believe Amazon will be wary about entering the wireless business because customer information is so tightly controlled in telecom.
The upshot, according to the analysts, is that “We’re skeptical about . . . well, all of it.”