Analysts Weigh In On Amazon's Next Potential Acquisition: Boost Mobile

Advertisement
Advertisement

Last week, Amazon was rumored to be looking to purchase Boost Mobile from Sprint. In an effort by T-Mobile and Sprint to get their merger approved by the Justice Department. Now analysts are starting to weigh in on the news, and it many don't think it would be a good move by Amazon.

One analyst from Moffett Nathanson wrote in a report on Friday that Amazon would be "bat s*** crazy" to enter the wireless industry. They also stated that "the idea that Amazon would actually want to enter the wireless market is bad enough. Over its now forty-year history, the wireless industry has never generated a return on invested capital meaningfully in excess of its cost of capital. And that's before the entry of a player like Amazon."

These analysts are basically saying that it wouldn't make a lot of economic sense for Amazon to get into the wireless space. Seeing as there is not a lot of return on investment, and like any company, Amazon is going to want to buy Boost Mobile and actually make money on it.

Advertisement

Amazon mostly wants to buy Boost Mobile because it would be able to use the New T-Mobile network, once the merger is approved. Which means that it would still be an MVNO. Amazon also wouldn't need to build out a network, as it can use the network that is already in place. So the return on capital that is invested, wouldn't really be an issue for Amazon, in that regard.

Now yes, Amazon may want and need a wireless network to control its driverless cars and drones that it plans to use for deliveries. But bringing that in-house would be a "blunder of epic proportions" according to the analysts at Moffett Nathanson. While that would mean that Amazon could control its network, more tightly, it would also cost Amazon a lot more. AT&T and Verizon have spent overĀ  $100 billion in the past decade, upgrading its networks.

On top of that, Moffett Nathanson also notes that the wireless industry is a very highly regulated industry. Something that Amazon likely won't want to dip their toes into just yet. So far, Amazon has been able to stay away from regulation, but if they jump into the wireless industry, that would change pretty dramatically.

Advertisement

It's important to remember that Amazon has only talked with the DOJ about possibly buying Boost Mobile. It has not made an offer, it is just entertaining the idea right now. For Amazon, it could also mean that it could offer discounted cellphone service to its Prime customers, like Comcast, Charter and a few other cable companies are already doing. Amazon could also bundle unlimited 4G LTE (and soon, 5G) with its Kindles and Fire Tablets allowing users to use them anywhere.

While the analysts aren't too fond of Amazon potentially breaking into the wireless industry, there are a lot of things that Amazon could use Boost Mobile for. But as of right now, this is all speculation, until someone actually does buy Boost Mobile.