T-Mobile and Sprint are aggressively pushing their $26 billion merger. Before the deal could go through, they are required to shed a few assets including Boost Mobile and some wireless spectrum. Sources familiar with the matter told Reuters that e-commerce and cloud computing giant Amazon was interested in buying Boost Mobile. Is Amazon planning to become the fourth carrier in the US after the T-Mobile and Sprint merger?
T-Mobile, Sprint have to divest Boost, some wireless spectrum
Amazon is not only interested in purchasing the Boost Mobile prepaid wireless service but also any wireless spectrum T-Mobile and Sprint could divest. The online retailer wants Boost because the acquisition would also give it the right to use the combined T-Mobile and Sprint’s wireless network for at least six years. The combined entity resulting from the merger of Sprint and T-Mobile is currently referred to as the ‘New T-Mobile.’
Boost Mobile is one of the prepaid brands of Sprint. T-Mobile and Sprint have pledged to sell it to reduce their market share in the prepaid market, which would allow them to gain regulatory approval for the merger. The US Department of Justice will scrutinize the potential buyer of Boost and other divested assets to ensure that they remain viable, reports Reuters.
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Sources familiar with the matter told Reuters that the sale of Boost Mobile could generate up to $3 billion for T-Mobile and Sprint. Boost is estimated to have 7-8 million subscribers. If the transaction includes wireless spectrum, the value of the deal could go up to $4.5 billion.
A few weeks ago, the Federal Communications Commission (FCC) approved the T-Mobile and Sprint merger. But the companies are required to shed Boost Mobile and build out the 5G network in rural areas. If the merger goes through, there will be only three leading wireless carriers left in the US, the other two being Verizon and AT&T. Antitrust officials have raised concerns that the lack of a fourth operator would encourage carriers to raise prices for users.
According to Bloomberg, the Department of Justice antitrust chief Makan Delrahim wants at least four major carriers in the US. The merger has been approved by the FCC, but it still needs the approval of the DOJ. So, who will create the fourth carrier to preserve competition? It could very well be Amazon.
Why does Amazon want Boost Mobile?
Reuters says it’s “not immediately clear” why Amazon would be interested in buying Boost Mobile and wireless spectrum. The online retailer could pitch itself as the fourth new telecom operator. Sean Hollister of The Verge speculates that having its own wireless network could prove beneficial for some Amazon products.
Amazon’s Echo Connect uses the customer’s home phone service and allows users to make phone calls via Alexa assistant. The online retailer prefers to deal directly with its customers. It has created a shipping giant and bought retailers like Whole Foods enhance the customer experience. It would want to own a wireless network to connect millions of users to its services.
Amazon is preparing to launch an online game streaming service, which could benefit from the company’s own wireless network, argues The Verge. Amazon is not the first technology company to explore the idea of offering Internet services. Facebook offers free Internet through its Internet.org initiative (now called Free Basics), which received a lot of criticism because it violates Net Neutrality. Google also offers Internet services.
Amazon is always exploring new business opportunities. Some of them fail (remember the Fire Phone?) while others have turned into multi-billion dollar products or services.