Amazon rumoured to be rummaging around Boost

Amazon is rumoured to be one of the parties interested in purchasing Sprint’s prepaid Boost, and while it might be a long-shot, all rumours eventually seem lead back to Amazon at some point.

According to Reuters, two individuals have suggested Amazon is in the market to purchase the prepaid brand, a casualty of concessions put in front of the telco if it is to realise its merger ambitions with T-Mobile US. While any divestment in Boost is only a potential outcome for the moment, if Sprint and T-Mobile US want to get the merger greenlight from the FCC, ditching one of the prepaid brands would be one of the three conditions.

Of course, what is worth noting is that Amazon is not the only interested party. Boost founder Peter Adderton has also shown interest in buying back the company he sold to Sprint in 2006. Funnily enough, Adderton has been one of the critics of the merger, though his tune seems to have changed since the opportunity to get a deal on Boost emerged…

This is nothing but speculation for the moment. Any divestment in Boost would depend on the merger between Sprint and T-Mobile US being approved, an outcome which is far from guaranteed considering alleged objections from the Department of Justice on the grounds of competition.

That said, a yes is a distinct (but fleeting…) possibility. And Amazon would of course be in the picture.

If Amazon is good at anything, it is a master at selling the brand and draining customer’s wallets for an extra couple of quid each month. Connectivity is an interesting prospect for Amazon, as while some might question why it would want to get involved in such a messy and decreasingly profitable industry, but there is an opportunity to create innovative products through bundling.

According to Ovum’s lead analyst for fixed and mobile Dario Talmesio, this could be an option for disruption. For the core eCommerce business, Amazon offers a premium delivery service for physical goods. For its digital assets, such as the content offering, why couldn’t it do the same? Connectivity is the delivery function of online services, so it is a similar concept.

The big idea here is adding value. Amazon might not necessarily make a significant profit from connectivity, but connectivity as a value add could have a compounding effect on the digital content business.

“Amazon is known for regularly screening the horizon for all kind of opportunities,” said Talmesio. “When it comes to MVNO-like connectivity, Kindle was in industry-first example of providing free (data) delivery, which was included in the cost of the subscription or purchase of the electronic books being downloaded. There is a reason why there should not be looking at replicating the same business to other services.

“Connectivity is a mean to an end: if you want to provide a frictionless retail shopping experience, for instance, why not include connectivity as part of Amazon Prime or Prime video or, in B2B why adding it to AWS services.

“The boundaries between connectivity and cloud are blurring, and the timing could be right for Amazon to redesign the connectivity business the same way they redesigned logistics, retail, and public cloud businesses.  Amazon is all about introducing excellence in processes that need to be turned into customer-first and digital first, adding connectivity to their existing plans makes sense, as long as it also makes financial sense.”

A new approach to telecommunications and connectivity is perhaps something which the industry, or more accurately, customers are craving.

Some might consider the telcos are in a slightly precarious position. For years, customers service and experience has been considered an afterthought, and it shows. This has the potential to create a scenario where the retail business of the telcos can be disrupted by those who take a more attentive approach to customer service.

A recent survey from Matrixx suggests 85% of UK and US consumers would consider switching to an Amazon mobile connectivity contract if the option was available. 64% also said they would switch providers to get a similar experience to their favourite apps. The internet giants might not be set up to manage infrastructure, but there may well be interest for alternative brands to manage the customer relationship.

Over in the US, Google Fi is looking like it could be a success as an MVNO, though it is still early days, while in the UK, Giffgaff is gaining traction month on month. Both of these brands demonstrate that an attentive approach to customer service and delivering an innovative service to customers will gain interest from bewildered and frustrated consumers.

Of course, what is worth noting is that this is not the first time Amazon rumours have focused on the connectivity world. Back in 2012, Amazon launched an MVNO service in Japan. In 2014, it launched the Amazon Fire Mobile, though this was pretty much a disaster. In 2015, there were rumours of a US MVNO service. Earlier this year, it was revealed Amazon had partnered with low-orbit nanosatellites firm Kuiper Systems. And of course, customers can buy embedded connectivity with Kindle products.

This is nothing but market speculation for the moment, and while it would surprise a few to see Amazon connected with connectivity, there is a nice fit with other aspects of the business.

Sprint/T-Mobile US merger set for a $3 billion boost

It looks like Sprint could trouser up to three billion bucks when it flogs its prepaid subsidiary Boost in a bid to placate antitrust authorities.

The Sprint/T-Mobile US merger saga has been going on for so long that people are starting to not care, but a recent set of negotiated concessions were enough to convince the head of the FCC to wave the deal though. The DoJ isn’t so sure, but they might as well go ahead with the placatory measures in the hope that it comes around eventually.

One of the biggest concessions will be selling Boost, a wholly-owned subsidiary of Sprint that specialises in prepaid contracts. TMUS is pretty hot on prepaid, so regulators concluded their combined efforts would take too much choice out of the prepaid market. Since this public commitment doesn’t put Sprint in the strongest negotiating position, the challenge is to get a decent price for Boost.

According to a Reuters report a company called Q Link Wireless is prepared to shell out somewhere between $1.8 billion to $3 billion for Boost. This is coming from the Q Link CEO, apparently, so we must assume it’s legit, but it also seems like a pretty broad range. What would make him pay almost double his lower figure? Some kind of bidding war presumably, so maybe he’s trying to scare off anyone not prepared to go to three bil.

The official line is that it depends on what he sees once he looks under the hood, with Sprint not yet having publicly disclosed key metrics such as churn, popular tariffs, etc. But FreedomPop is reportedly talking to private equity about getting involved and they would apparently be prepared to go up to four bil, so this has the feel of an auction carried out via the media.

FCC Chairman convinced by T-Mobile/Sprint concessions

FCC Chairman Ajit Pai has publicly stated he believes the concessions made by T-Mobile US and Sprint are enough to ensure the merger would be in the public interest.

Over the course of the weekend, rumours emerged over concessions the pair would have to make to get the support of the FCC, though rarely are sources so spot on. The merged business will now have to commit to a nationwide 5G deployment within three years, sell Sprint’s prepaid brand and promise not to raise prices during the rollout years, if it wants the greenlight of the FCC.

What is worth noting is this is not a greenlight just yet. Pai has said yes, though he will need a majority vote from the Commissioners. Commissioner Brendan Carr has already pledged his support, and we suspect Michael O’Reilly will in the immediate future also. The Democrats might want to throw a spanner in the works, but this would be largely irrelevant with O’Reilly’s support.

“In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it,” Pai said in a statement.

“This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans. We should seize this opportunity.”

As you can imagine, T-Mobile US CEO John Legere certainly has something to say on the matter.

“Let me be clear,” Legere stated in a blog entry. “These aren’t just words, they’re verifiable, enforceable and specific commitments that bring to life how the New T-Mobile will deliver a world-leading nationwide 5G network – truly 5G for all, create more competition in broadband, and continue to give customers more choices, better value and better service.”

The first commitment made by T-Mobile US and Sprint is a nationwide 5G network. Considering Legere has been claiming his team would be the first to rollout a genuine 5G network for some time, it comes as little surprise the FCC will want to hold him accountable.

Over a three-year period, presumably starting when the greenlight is shown, the new 5G network will cover 97% of the population. 75% of the population will be covered with mid-band spectrum, while the full 97% will have low-band. This is a very traditional approach to rolling out a network, as it meets the demands of capacity and efficiency, though there is a sacrifice on speed.

Perhaps more importantly for the FCC, the plan also covers objectives to bridge the digital divide. 85% of the rural population will be connected during this period, increasing to 90% after six years. This is not to say all the farmers fields will be blanketed in 5G, though it does help provide an alternative for the complicated fixed broadband equation in the rural communities.

Moving onto the divestment, selling Sprint’s Boost prepaid brand seems to be enough to satisfy the competition cravings of Pai. What is worth noting is this will not be a complete break-away from the business as it will have to run on the T-Mobile US network. Unfortunately, MVNOs in the US are not as free to operate as those in Europe, as switching the supporting network would mean have to change out all the SIM cards.

This becomes complicated as you do not necessarily know who your customers are in a prepaid business model. The situation certainly encourages more competition, it will after all not be part of the T-Mobile US/Sprint family anymore, but it is far from a perfect scenario.

Finally, Legere has promised tariffs will not become more expensive during the deployment period, another worry for the FCC should the duo want to meet the ambitious objectives to compete with AT&T and Verizon. However, it does appear Legere is promising 5G tariffs will not include a premium either.

And now onto the other side of the aisle. Commissioner Jessica Rosenworcel has tweeted her opinions on the concessions and it appears she is not convinced.

“We’ve seen this kind of consolidation in airlines and with drug companies. It hasn’t worked out well for consumers. But now the @FCC wants to bless the same kind of consolidation for wireless carriers. I have serious doubts.”

Rosenworcel has also suggested the decision should be put out for public consultation. We suspect Pai will want to avoid this scenario, as it would be incredibly time-demanding; the Chairman will want the merger distraction off his desk as soon as possible.

Commissioner Geoffrey Starks is yet to make a comment, but DO NOT, I repeat, DO NOT go on his Twitter page if you haven’t watched the latest Game of Thrones episode.

We understand the Democrat and Republican Commissioners are going to be at each other’s throats over pretty much every decision, however trolling any innocent individual with a GoT spoiler is a low blow.

Starks and your correspondent are going to have some issues.