US telecom stocks hit as Amazon in talks for cellphone services
The arrival of the online retail giant could cause major disruptions in US telecoms, which rank among the highest rates globally.
Shares of Verizon Communications Inc, AT&T Inc and T-Mobile US Inc fell Friday after a report said Amazon.com was in talks with the US telecom companies to offer low-cost wireless services to its Prime members.
Bloomberg News reported that Amazon was negotiating to get the lowest possible wholesale prices and could offer wireless plans for $10 a month or less to Prime members through the partnerships, including a potential partnership with Dish Network.
“We are always exploring adding even more benefits for Prime members, but have no plans to add wireless at this time,” an Amazon spokesperson said in response to a question from Reuters news agency.
Several analysts said the arrival of the online retail giant could lead to major disruptions in the telecom space as it could offer cheaper plans in a country with some of the highest wireless rates in the world.
“Amazon could certainly take a big chunk of it and undercut competitors,” said Christopher Ali, a professor of telecommunications at Penn State University. “Maybe we’ll see cell phone prices come down, which would be great.”
Shares of Amazon rose more than 2 percent and were among the top boosts for the benchmark S&P 500 Index, while Verizon, AT&T and T-Mobile fell between 3 percent and 8 percent.
AT&T declined to comment, while Verizon and T-Mobile denied the talks. Dish did not respond to Reuters requests for comment.
KeyBanc Capital Markets’ Brandon Nispel said Dish Network, a relatively new wireless communications player, could be Amazon’s most likely partner.
He said a deal would give Dish access to funding that could help build out its network, while the other carriers probably wouldn’t work with Amazon because “they clearly don’t want to change the status quo of the industry.”
Dish’s shares defied the sector’s gloom, rising 22 percent. They also rallied in May after a report in the Wall Street Journal that Dish was in talks to sell its wireless plans through Amazon.
For Amazon, a deal could attract more customers to its Prime service at a time when growth in key markets, including the US, has leveled off.
The company’s revenue growth slowed to its lowest point in at least 20 years in 2022 as businesses and consumers cut spending in a tough economy.
“Several potential benefits could arise from such a move, including improving Prime member retention rates, allowing it to slightly increase annual subscription costs and providing Amazon with a direct channel into the lucrative multibillion-dollar market for mobile phone sales and financing.” said Michael Ashley. Schulman, chief investment officer at Running Point Capital Advisors.