US telecom stocks hit as Amazon in talks for cellphone services

Shares of Verizon Communications Inc, AT&T Inc and T-Mobile US Inc declined on Friday after a report said Amazon.com was in talks with the US telecom firms 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 lower to Prime members through the partnerships, including a possible tie-up with Dish Network.

“We are always exploring adding even more benefits for Prime members, but don’t have plans to add wireless at this time,” an Amazon spokesperson said in response to a query from the Reuters news agency.

Several analysts said the online retail giant’s entry could lead to major disruptions in the telecom space as it could offer cheaper plans in a country with some of the highest wireless charges in the world.

“Amazon could certainly put a lot of its weight behind it and undercut competitors,” said Christopher Ali, professor of telecommunications at Penn State University. “We might actually see cell phone prices go down, which would be a great thing.”

Amazon’s shares 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.

Brandon Nispel of KeyBanc Capital Markets said Dish Network, a relatively new entrant in wireless, could be the most likely partner for Amazon.

He said a deal would give Dish access to financing that could help build out its network, while the other carriers were not likely to partner with Amazon as “they obviously don’t want to change the status quo of the industry.”

Dish’s shares defied the sectoral gloom to rise 22 percent. They had also rallied in May after a Wall Street Journal report that Dish was in talks to sell its wireless plans through Amazon.

For Amazon, a deal could draw more customers to its Prime service at a time growth in key markets including the US has plateaued.

The company’s revenue growth slowed to its lowest in at least 20 years in 2022 as businesses and consumers cut back on spending in a tough economy.

“Several possible benefits may accrue from such a move including improving Prime member retention rates, allowing it to slightly increase annual subscription costs and providing Amazon a direct channel to the lucrative multi-billion dollar market of selling and financing mobile phones,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.