Does Amazon really want to be a mobile operator?

Does Amazon really want to be a mobile operator?

U.S.-based global e-commerce giant Amazon is looking into acquiring U.S. operator Sprint’s Boost Mobile MVNO brand, according to news report. The U.S. regulator FCC has told Sprint that is has to sell the unit if it wants to get its $26 billion merger with T-Mobile US approved. Sources said that Amazon is mainly interested in the fact that any deal will allow the buyer of Boost Mobile to use T-Mobile’s network for at least six years. Amazon has reportedly also expressed interest in buying any other spectrum frequencies that Sprint and T-Mobile might divest as part of the deal.

The sale of Boost could bring in US $3 billion, according to potential bidders. Other parties interested in the deal include Q Link Wireless, a private equity firm working with FreedomPop and the former owner of Boost Mobile.

Tarifica’s Take

The news this week that Amazon is considering acquiring mobile spectrum left analysts wondering what the purpose might be. Would Amazon really want to become a mobile operator, taking the U.S. total back up to four just as the Sprint–T-Mobile merger (if it happens) brought it down to three? It seems preposterous, given the intense regulation of the mobile telecom market, the high costs of running a network and the fact that revenue from traditional mobile services is declining, in general. What’s more, if Amazon really wanted to add mobile telecom services to the diversified slate of services it already offers, it could simply start an MVNO and run it on someone else’s network, at immense cost savings.

So we have to assume that Amazon—if indeed it is seriously contemplating such a move—wants the spectrum for some purpose other than starting its own MNO. We can imagine several. For one, having its own spectrum could be of great use to Amazon if it implements delivery services via drones and automated vehicles, which are in development. Second, even as things currently stand, Amazon’s business depends on the internet of things and automation at many levels, and having its own network could be advantageous in that respect. And third, Amazon has a longstanding policy of offering as many goods and services as possible and controlling as many stages of the sales process as possible; therefore having mobile spectrum at its disposal could be a way of extending that control, perhaps even to some extent over mobile devices, which are increasingly the point of sale for Amazon products.

Some analysts have questioned the wisdom of Amazon buying spectrum, citing the costs and risks. However, we would prefer to withhold judgment, because of the company’s history of successful diversification and vertical integration, and because of its extremely deep pockets, which make investments that would be risky for just about any other entity less risky. If Amazon really is going to go ahead with the plan to buy Boost Mobile and thereby get access to T-Mobile network assets for six years, it may well find a way to utilize that to its benefit before that time period is up. Drones and automated delivery vehicles may sound fanciful now but Amazon takes them seriously in its vision for the future. The e-commerce giant can certainly afford to play a long game.