Amazon Considers Entering Wireless Service Market, Impacting Telecom Stocks

Amazon.com is reportedly in discussions with major U.S. telecom companies to offer affordable wireless services to its Prime members, causing a significant impact on telecom stocks. According to Bloomberg News, Amazon is negotiating to secure the lowest wholesale prices and may offer wireless plans for as low as $10 a month or less through partnerships, potentially including a deal with Dish Network.

An Amazon spokesperson, responding to an inquiry from Reuters, stated that while the company continuously explores new benefits for Prime members, there are no immediate plans to add wireless services.

The news has sparked a notable reaction in the telecom industry, with shares of Verizon Communications Inc, AT&T Inc, and T-Mobile US Inc experiencing declines. Conversely, Amazon’s shares rose, positively influencing the S&P 500 Index. AT&T declined to comment on the matter, while Verizon and T-Mobile denied being in discussions with Amazon. Dish Network has not responded to requests for comment.

Experts speculate that Amazon’s entry into the wireless market could disrupt the sector by offering more competitive pricing in a country known for high wireless charges. Christopher Ali, a telecommunications professor at Penn State University, suggests that Amazon’s influence could lead to reduced cell phone plan costs.

Analysts are considering the potential implications of such a move. Brandon Nispel from KeyBanc Capital Markets views Dish Network as a probable partner for Amazon, offering Dish the financial support needed to expand its network. He notes that existing major carriers might be reluctant to partner with Amazon, preferring to maintain the current industry dynamics.

Dish Network’s stock has seen a positive trend, increasing by 22 percent. This follows a similar surge in May after reports of potential discussions between Dish and Amazon.

For Amazon, a venture into wireless services could attract more customers to its Prime service, particularly in markets where growth has slowed. In 2022, the company witnessed its slowest revenue growth in two decades, amid economic challenges affecting consumer and business spending.

Michael Ashley Schulman, Chief Investment Officer at Running Point Capital Advisors, highlighted several benefits Amazon could gain from entering the wireless market. These include improving Prime membership retention, the possibility of increasing subscription fees, and tapping into the lucrative market of selling and financing mobile phones.

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