Telecom stocks tumbled Friday on renewed reports that e-commerce giant Amazon.com plans to resell mobile phone services in the U.S. through its Prime loyalty program. Amid the reports on AMZN stock, a spokesperson says it is not planning to resell wireless services currently.
AT&T, Verizon Communications and T-Mobile US all closed down on the reports, although the companies issued statements that no deal was imminent. Dish Network surged and Amazon stock ended the day higher.
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.
AMZN Stock: 'No Wireless Plans At This Time'
In an email to Investor's Business Daily, an Amazon spokesperson said: "We are always exploring adding even more benefits for Prime members, but don't have plans to add wireless at this time."
Meanwhile, Verizon spokesperson Rich Young in an email said nothing is going on.
"Verizon is not in negotiations with Amazon regarding the resale of the nation's best and most reliable wireless network," Young said. "Our company is always open to new and potential opportunities, but we have nothing to report at this time."
An AT&T spokesperson emailed a statement that said: "AT&T is not in discussions with Amazon to resell wireless services."
Meanwhile, T-Mobile sent Investor's Business Daily this statement: "Amazon is a great partner to T-Mobile in many areas, and we are always interested in working more closely with our crosstown neighbors in new ways. However, we are not in discussions about inclusion of our wireless in Prime service, and Amazon has told us they have no plans to add wireless service."
Regulatory Risk For Amazon?
Further, Amazon aims to get the lowest possible wholesale prices, said the Bloomberg report. 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," he added. "Obviously the carriers aren't going to enter into an unprofitable deal."
SVB MoffettNathanson analyst Craig Moffett said in a note that Amazon would take on new regulatory risk by entering the wireless market.
"Rules surrounding customer information in telecom are much stricter than what Amazon faces today," Moffett said.
Telecom Stocks Laggards, Amazon Gains
AMZN stock rose 1.2% to close at 124.25 while T stock fell 3.8% to 15.21 on the stock market today. Meanwhile, VZ stock retreated 3.2% to 34.58 while TMUS stock fell 5.6% to 131.19. But Dish stock surged 16.2% to 7.30.
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. But it depends 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 his 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.
