The report from Reuters, which cites “two sources familiar with the matter,” adds that one of the sources had suggested Amazon’s aim is to gain access to the new T-Mobile’s network for at least six years. “New T-Mobile” is apparently the name being used to refer to the network that would result from a successful deal.
Amazon steps out against the backdrop of a much-discussed and long-fought $26 billion merger between T-Mobile and Sprint, the third and fourth largest mobile network operators in the United States. Though the Federal Communications Commission has given its blessing to the deal, the Justice Department had stood firm and on Wednesday said it wanted the two companies to lay the groundwork for a new wireless carrier with its own network, Bloomberg reported. Creating a full national competitor would be a difficult ask, however.
In developed markets, it is normal to favour at least four mobile network operators. If the market contracts to three, the companies left are then able to more easily raise the rent that virtual network operators – think Straight Talk, Google Fi, Ting, or Cricket – pay for the use of network infrastructure. This cost will affect consumers.
Reuters’ source added that Amazon was also interested in any of the spectrum that the “New T-Mobile” would have to divest in order to get the deal over the line. The news agency said that it was not “immediately clear” why Amazon would want access to a wireless network and spectrum.
If the stories are linked, this suggests the sale of Boost, itself an MVNO on Sprint’s network, which T-Mobile and Sprint had already pledged to sell in order to reduce market share in the prepaid category and therefore preserve competition.
Amazon has a rich pedigree of entering new categories outside of its core e-commerce business. The closest it has come to the telecommunication has been through its Echo Connect product, through which users can make phone calls using their home phone service via the device.
Analysts at Cowen believe that with an estimated 8 million Boost customers and a chunk of wireless spectrum – the section of the radio wave on which data is carried – the deal could be worth $4.5 billion.
For Amazon, a foot in the door of the network game could signal a move into services in which an optimised network could give it a large advantage. The Verge, in a speculative piece, noted the rumours that Amazon is planning a cloud gaming initiative similar to those announced by Apple and Google recently. Alternatively, a last-mile network offer could bolster its AWS cloud computing business, by bringing that computing power closer to the edge of a network.
Sourced from Reuters, Bloomberg, WARC, The Verge