Verizon Communications Inc (NYSE:VZ) executives have said before that leasing spectrum makes no sense, not when buying is still a viable option. The same applies to AT&T Inc (NYSE:T) and Sprint Corp (NYSE:S), who has unused spectrum at their disposal. This leaves very few options for DISH Network Corp (NASDAQ:DISH), mainly T-Mobile US Inc (NASDAQ:TMUS), none of which have worked out for DISH.
Besides being a top satellite TV service provider, DISH Network (NASDAQ:DISH) owns a very impressive band of AWS-4 spectrum with essentially no congestion whatsoever. That’s why a partnership with Amazon.com Inc (NASDAQ:AMZN) for the e-commerce giant to lease its network for wireless services could be a breakthrough if the reports are accurate.
Spectrum is like an interstate for wireless service providers. Data is equivalent to cars on the interstate, and with each passing day, more and more cars are being piled onto that interstate. And with each new iPhone, Apple doubles the size of each car it puts on the interstate.
Eventually, if the lanes are not widened, or new roads aren’t built, then traffic slows down.
How AMZN creates big problems for wireless giants
With that said, rumors have spread over the years that Amazon.com wants to launch a wireless business, and would do so as an MVNO of AT&T or Verizon. That means Amazon piggybacks their network, essentially leasing. Given the size of these respective networks, and fears of data throttling and competitive advantages, Amazon.com Inc (NASDAQ:AMZN) likely realizes it is better to go in business with DISH Network (NASDAQ:DISH) who has a very good yet empty highway/network. After all, if Amazon.com Inc (NASDAQ:AMZN) is serious about mobile, then it is better to beat your competitors, not join them.
Fact is DISH Network has the network that Amazon.com (NASDAQ:AMZN) needs to make a real push in mobile. Without the network, Amazon.com Inc (NASDAQ:AMZN) would have to spend 10s of billions on spectrum and increased capital expenditures by a similar degree just to become somewhat relevant. That would be too big of a risk in the event Amazon.com failed. Furthermore, after taking such a big risk, AMZN might not be able to use the network how it wants to gain a competitive advantage.
With DISH, the liabilities for Amazon.com Inc (NASDAQ:AMZN) are low. It just leases the network, and DISH Network (NASDAQ:DISH) would likely agree to a lease-by-use format. If so, we already know that Amazon can succeed with cheap yet good hardware (Kindle, Alexa), and could offer plans that not even Sprint and T-Mobile could match.
How could Sprint Corp (NYSE:S), T-Mobile (NASDAQ:TMUS), AT&T (NYSE:T), or Verizon Communications (NYSE:VZ) compete if Amazon.com (NASDAQ:AMZN) decides to offer free wireless services to Prime members? Think it is impossible? There was a time when AMZN stock owners thought free shipping and streaming for Prime members was impossible too. As seen below, Amazon.com is a rare company that can keep hiking its spending on Prime related services, of which creates no revenue, and yet AMZN stock has still tripled over the last five years.
The bottom line: If Amazon.com Inc (NASDAQ:AMZN) and DISH Network (NASDAQ:DISH) start working together, Sprint stock and TMUS stock owners should be terrified; AT&T stock and Verizon stock owners should be very concerned; and AMZN stock owners should buy more.