May 31, 2019

News | Market News | Boost Mobile Deal: Amazon Said Access to Spectrum Essential

By Deborah DSouza Updated May 31, 2019

The latest news report about Inc. (AMZN) has left ordinary investors and industry experts equally puzzled. According to two unnamed sources speaking with Reuters, the e-commerce giant is interested in buying prepaid cellphone wireless service Boost Mobile from U.S. carriers T-Mobile US Inc. (TMUS) and Sprint Corp. (S).
A source added that the main reasons Amazon is considering a deal is because it can then use the combined company's (T-Mobile and Sprint are seeking regulatory approval for a merger) wireless network for at least six years and buy any wireless spectrum divested.
Boost is one of many mobile virtual network operators (MVNOs) reliant on Sprint, meaning it is a carrier that doesn't own any network infrastructure or spectrum licenses and resells minutes it buys wholesale from mobile network operators (MNOs). It has 7 million to 8 million customers, according to estimates from Cowen analysts cited by Reuters, and Sprint has promised to sell it to placate regulators.
Why Amazon is after a wireless network or spectrum is not clear and speculation online is abundant. Does Amazon want to sell phones? Does it want to be the fourth major mobile operator in the country? Does it want to control all the ways it deals with its customers? The possibilities are endless for a juggernaut like Amazon.
It's also good to remember that in 2017, The Wall Street Journal reported the company was interested in a wireless partnership with Dish Network Corp. According to sources, the idea was that Amazon, as a founding partner of Dish’s new wireless network, "could offer an option for Prime members to pay a little more a month for a connectivity or phone plan."

Amazon: Access to Spectrum Essential

Amazon spent a record $14.4 million on lobbying government entities in 2018, which was more than any other tech company. In 2017, it spent $13 million and it has spent almost $4 million in the first quarter of this year.
The lobbying records, from OpenSecrets, offer us some interesting insight. Amazon first mentioned "spectrum" and "broadband and spectrum" in its filings in 2017 and continued to do so in 2018. In 2018, the company also joined the Dynamic Spectrum Alliance, an organization that lobbies for laws and regulations "that will lead to more efficient and effective spectrum utilization" and counts Alphabet Inc. (GOOG), Facebook Inc. (FB) and Microsoft Corp. (MSFT) among its members.
“Our products and services are smarter, faster and more convenient because we have access to unlicensed wireless spectrum,” said Brian Huseman, VP of public policy of Amazon, in a statement at that time. “Access to spectrum is essential for the creation and growth of ground breaking, consumer-focused technologies and we look forward to working with the Dynamic Spectrum Alliance to ensure we maintain it.”
The company lobbied on a law that increases unlicensed spectrum available for mobile and fixed wireless broadband use. But it looks like it is now interested in securing its interests by owning spectrum. Especially since the advent of 5G internet will increase the demand for airwaves.
"Three words: wholesale transfer pricing," tweeted Microsoft Senior Director Tren Griffin about the deal. "The U.S. MVNO graveyard is populated with many who died from 'supplier bargaining power.'"

Source: Investopedia

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