E-commerce and streaming giant Amazon.com Inc. has been in discussion with wireless carriers about “offering low-cost or possibly free nationwide mobile phone service” to Prime subscribers in the US, reported Bloomberg on Friday citing people familiar with the situation.
According to the report, the company is negotiating with Verizon Communications Inc., T-Mobile US Inc., and Dish Network Corp. to get the lowest possible wholesale prices. People told Bloomberg that Amazon has asked the company to offer Prime members wireless plans for $10 a month or possibly for free and bolster loyalty among its biggest spending customers.
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The report said that the negotiations have been going on for 6 to 8 weeks and have also included AT&T Inc. at times, but the plan may take several more months to launch and could be scrapped.
“We are always exploring adding even more benefits for Prime members, but don’t have plans to add wireless at this time,” Amazon spokesperson Maggie Sivon told Bloomberg.
Amazon’s Prime subscription in the US costs $139 per year and provides benefits such as fast free delivery, video streaming, and access to a vast music library of 100 million songs. However, The report noted that analysts have suggested that Prime membership growth has stalled in the country after Amazon raised the annual price from $119, indicating that consumers are finding the subscription less appealing amid high inflation.
As of March, approximately 167 million Amazon shoppers held Prime memberships, which remained unchanged from the previous year, according to Consumer Intelligence Research Partners, the report noted.
In the competitive landscape, Amazon faces rivalry from Walmart Inc., which offers its Walmart+ membership at $98 per year, the report said. Adding that Walmart+ is emerging as a more affordable alternative that provides similar perks to Prime, along with free grocery delivery for orders worth at least $35. In response, Amazon raised its free grocery delivery threshold from $35 to $150 in February.
An Amazon partnership in the wireless industry could have positive implications for wholesale revenue and contribute to an increased usage of recently expanded 5G networks, the report said. Adding that the entry of Amazon could also pose a challenge if Prime Wireless gains popularity and begins to erode the customer base of established carriers.
According to Bloomberg, Amazon has the potential to offer significantly lower prices compared to the big three national carriers. This could undermine the pricing power of carriers like Verizon and T-Mobile, whose unlimited plans start at $60 per month, and AT&T, which starts at $65 per month. The attractive pricing from Amazon may tempt subscribers to switch their services.
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Amazon’s Prime Wireless could disrupt the industry by offering attractive mobile service to its Prime members, potentially causing customers to switch from their current providers. The move aligns with Amazon’s history of investing in new markets to drive Prime membership growth, even if it means taking a hit on costs. This development puts industry players, including Walmart, on high alert.
Mobile operators, who have invested heavily in 5G networks, may find it difficult to reject Amazon’s entry into the wireless market, the report said. Despite a failed attempt with the Fire Phone in 2014, Amazon is determined to explore new opportunities in the wireless industry, including the upcoming Project Kuiper satellite-internet service.
Dish Network already is collaborating with Amazon’s AWS division to leverage cloud computing for its wireless service. Dish is expected to launch its Boost Infinite wireless service on Amazon soon, as it aims to transform into a cloud-based wireless carrier competing against Verizon and AT&T. However, Dish faces financial challenges and is seeking new funding options.
According to the report, by adopting a reseller approach as a mobile virtual network operator (MVNO), Amazon can avoid the high costs of building its own network. While MVNOs have had mixed success in the past, there are examples like Google Fi, which operates on T-Mobile’s network and has a customer base of around 2 million.
The report noted that wireless services are increasingly being bundled with broader service packages, as seen with cable companies like Charter Communications and Comcast offering wireless services alongside broadband as promotional offers.
