Sprint and T-Mobile US have indicated that they are prepared to put prepaid brand Boost Mobile up for sale if their proposed merger is approved. Reuters reports that there is an interested buyer: Amazon.
Amazon is interested “mainly because the deal would allow it to use the new T-Mobile’s wireless network for at least six years,” Reuters reported, citing two anonymous sources familiar familiar with the matter — but the online retail and cloud computing giant is also interested in any spectrum assets that might have to be divested as part of a merger approval. The news agency previously reported that Boost Mobile could be valued at as much as $3 billion to $4.5 billion.
In a recent analyst note, Cowen & Company analysts addressed the Amazon rumors and concluded that “Amazon is likely to be less interested in Boost and more interested in the wholesale agreement, although potentially for different purposes.” Cowen predicted earlier this year that Amazon would enter the wireless industry, because “5G will be a significant driver of cloud computing and for Amazon specifically if they were to secure an attractive wholesale agreement they could use that to offer a turnkey-holistic solution to those creating 5G services that includes both a 5G wireless network and the necessary cloud computing.”
The impact of the proposed merger of Sprint and T-Mobile US on the prepaid and wholesale market has been one that has drawn concern, which the two companies sought to address in recent concessions — among them, the divestiture of Boost.
In a filing, the companies said that “while [Sprint and T-Mobile US] had planned that Boost would continue to be an effective and meaningful competitor as part of the New T-Mobile portfolio of brands, [the companies]now commit to divest and sell the Boost business to remove any remaining doubts regarding the impact of the merger on prepaid wireless customers and competition.” The commitment also includes a six-year MVNO agreement “that will include wholesale rates that will meaningfully improve upon the commercial terms reflected in the most favorable of T-Mobile’s and Sprint’s three largest MVNO agreements.”
T-Mobile has 38% of the U.S. pre-paid market and Sprint has 16%, giving the combined company 54% of the market, according to S&P. Principal analyst Jeff Moore of Wave7 Research, however, told RCR Wireless News earlier this year that a union of T-Mobile US and Sprint’s prepaid operations would yield nearly 30 million subscribers, or about 38.9% of the total prepaid market. But it’s not just about the size of the prepaid customer base that a combined Sprint/T-Mo would end up with — Boost and MetroPCS have been driving price wars for prepaid customers in major metropolitan markets, mostly by competing with each other. Bringing the two of them under one roof would basically eliminate each company’s arch rival in metro markets.
Sprint has historically had a reputation as the mobile network operator that is most friendly to mobile virtual network operators or MVNOs. Sprint’s wholesale systems and pricing have a reputation among wholesalers for flexibility and support of innovation — as opposed to carriers which aren’t particularly open in bringing on MVNOs, charge such high prices that the MVNO has limited ability to put out unique offers, or are only interested in MVNOs that target customer segments where the carrier’s retail brand doesn’t perform well. It’s unclear if T-Mobile US would be willing to take up the mantle of being the most MVNO-friendly among the national operators, although among the recent concessions was a commitment to work with Altice’s existing MVNO agreement.
“New T-Mobile will not exercise any termination rights under Altice’s MVNO agreement with Sprint that might be triggered by the merger,” Sprint and T-Mobile US said. “In addition, New T-Mobile commits to engage in good faith negotiations to expand the existing Sprint/Altice agreement to the New T-Mobile 5G network.”
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