Amazon reportedly in talks to sell phone service as part of Prime

Shares in Verizon, T-Mobile and AT&T tumbled today after Bloomberg reported that Amazon is in talks with carriers to possibly resell low-cost or free cell phone service to Prime members.

Citing people familiar with the situation, Bloomberg said Amazon is holding discussions with Verizon, T-Mobile and Dish Network to get the lowest possible wholesale price. The negotiations, which have been ongoing for six to eight weeks, have at times included AT&T, according to the report.

T-Mobile, AT&T and Verizon all told Bloomberg they were not currently in discussions with Amazon about wireless service. 

“AT&T is not in discussions with Amazon to resell wireless services,” AT&T said in a statement provided to Fierce after this story was first published.  

T-Mobile issued the following statement: “Amazon is a great partner to T-Mobile in many areas, and we are always interested in working more closely with our cross-town 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.”

Similarly, Verizon denied any discussions with Amazon. “Verizon is not in negotiations with Amazon regarding the resale of the nation's best and most reliable wireless network. Our company is always open to new and potential opportunities, but we have nothing to report at this time," the company said in a statement. 

Dejà Vu

It’s far from the first time Amazon has seemingly mounted a challenge to wireless carriers. Perhaps the most recent was Amazon entering the private wireless market. But Amazon’s MVNO ambitions, where it uses the network of a wireless carrier on wholesale basis, is often cited as a way to disrupt the wireless space. Last month, the Wall Street Journal reported that Dish is in talks to sell its nascent phone service through Amazon. Dish also reportedly was in talks with Amazon back in 2017.

Amazon isn’t saying much. “We are always exploring adding even more benefits for Prime members, but don’t have plans to add wireless at this time,” Amazon spokesperson Betsy Harden told Fierce in a statement.

Shares in Dish were up more than 20% at one point today while shares of Verizon and T-Mobile were down more than 5%. AT&T shares were down over 4%.

Dish needs it more than anyone, but…

While the idea of Amazon buying wholesale and selling phone service on the cheap sounds like a carrier’s worst nightmare, selling wireless services online isn’t necessarily a slam dunk.

“Nobody is really that good at selling online,” said Recon Analytics founder and analyst Roger Entner. “The carriers have tried this for many, many years. You can buy service today on Amazon, and the experience is not spectacular.”

While Dish is most in need of a partner like Amazon – and it’s already a big Amazon customer – talking to Dish for an MVNO deal “would be like a courtesy call” on the part of Amazon, Entner said.

Amazon wants to sell to consumers in the entire United States, not just to the 70% of the population that Dish needs to serve with 5G by its mid-June deadline, he said. “And it’s probably not going to be a stellar service in the beginning, so if the call doesn’t go through, will they blame Amazon for it or Dish? They will blame Amazon for it.”

Indeed, Dish needs to make a big move to right the mobile ship, said IDC analyst Jason Leigh. The company has lost 1.4 million subscribers since acquiring Boost as part of the T-Mobile/Sprint deal.

Those losses come despite gaining about 200,000 subscribers when it acquired Republic Wireless and another roughly 200,000 when it acquired Ting Mobile. “The challenging subscriber trends might put Dish in a position to be most amendable to Amazon’s demands,” Leigh said. “At the same time, Dish’s coverage is very different than other carriers, meaning it would have less appeal because the service could only be offered over a smaller footprint.”

Other considerations

Diving deeper into what the talks between Amazon and the carriers might entail, it’s clear that the plan may take several more months to be hatched and ultimately could be scrapped, as the Blooomberg report noted.

Verizon has a strong MVNO portfolio, with its network underpinning the offerings of Comcast (Xfinity Mobile), Charter (Spectrum Mobile) and Cox’s recent mobile launch, Leigh said. T-Mobile’s network supports MVNO offerings by Altice (Optimum) and Google Fi, so there’s plenty of experience in the MVNO realm, “but nothing to the scale of what an Amazon Prime-fueled MVNO might represent,” he said.

One challenge someone like Verizon might face is that to win the business with Amazon, they might need to cede some hefty terms on pricing or other areas, and in doing so, they might face pressure to offer similar terms to their Comcast/Charter/Cox MVNO portfolio customers, Leigh said.

“It may not be an ideal situation, but the carriers will likely fight over the deal,” Leigh said. “It is less about a strong revenue generation and more about making sure that one of their competitors doesn’t win it.”

That said, Amazon also wants to sell cloud services to telcos. If it goes into competition with its customers, “that doesn’t usually end well,” Entner said. “They want billions of dollars from the carriers. If I’m Carrier X and Amazon buys Carrier Y’s service to compete against me, do you know how quickly I’m going to cancel their contract?”

Story updated June 2 with comments from AT&T, T-Mobile and Verizon.