A recent Bloomberg article has revealed that Amazon (NASDAQ:AMZN) is engaging in discussions with major wireless carriers like Verizon Communications (NYSE:VZ), T-Mobile (NASDAQ:TMUS), and DISH Network (NASDAQ:DISH) for a potential partnership to offer low-cost wireless plans to its Prime subscribers. The news comes just a week after another report that Amazon and DISH were in discussions to sell DISH wireless plans through Amazon (i.e., effectively a distribution partnership to help DISH improve sales into its struggling wireless business).
According to Wells Fargo, if Amazon enters the wireless market by selling its own branded plans, it could have a significant impact due to the strength of its brand and vast distribution network (+200 million Amazon Prime subscribers globally, and ~150M in the U.S.).
T-Mobile and Verizon Communications already came out this morning and stated they were not in talks to add Amazon as a partner. Wells Fargo believes this would leave DISH as the most likely partner, although DISH leverages a wholesale agreement with AT&T (NYSE:T) and T-Mobile in areas where it does not have coverage.
Following the news, DISH stock jumped more than 16% on Friday, while telecom stocks had a terrible day, with Verizon down 3%, and T-Mobile down 5%.
The article also mentioned that Amazon is negotiating for the lowest possible wholesale prices from a network partner.
According to BofA Securities, in a worst-case scenario, Amazon could introduce its own wireless product by leveraging a premier network wholesale deal and bundling it with Amazon Prime at a significant discount compared to existing mobile alternatives.
According to the bank, the situation resembles the prisoner's dilemma, where each carrier fears that another carrier might strike a deal that could harm the industry. While carriers come out denying Amazon talks, and so did Amazon, analysts at HSBC mentioned that nervousness around the pricing environment and customer growth prospects are evident.