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After 30 years in and around the telecom industry, market analyst Craig Moffett of MoffettNathanson is sometimes tempted to play the role of grizzled veteran and act as though nothing can surprise in the day’s news.
“But then, every once in a while, a news item comes along that is so batshit crazy…sorry for the profanity,” Moffett said, “that one is simply brought up short.” Moffett cited last week’s report that Amazon is considering buying Sprint’s Boost brand, and, with accompanying spectrum, entering the wireless market.
“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,” he said. While he fully appreciates the idea that Amazon may harbor long-term visions of wirelessly piloted delivery drones and driverless delivery vehicles, the idea that one would want to operate their own proprietary network for such purposes is, in Moffett’s opinion, “economically insane.”
Moffett feels network loading is of paramount importance in lowering unit costs making proprietary networks untenable.
“If having a network for the purposes of drones or driverless vehicles is ever going to be mission critical to Amazon’s business,” Moffett said, “it would be a strategic blunder of epic proportions to bring such a network in-house. Oh, and did we mention the fact that telecom is, by its very nature, a highly regulated business? Would Amazon really want to open itself to the regulatory scrutiny and limitations that come with being a telecom provider?”
Moffett wonders if going from four to three carriers and then back to four, when the fourth is now Amazon rather than wounded-duck Sprint, would be better than the current industry structure.
“SoftBank may want or need to wash its hands of Sprint at any cost,” he said, “but T-Mobile and DT actually have the perfectly viable option of remaining independent.”
June 4, 2019