Amazon–Dish Partnership: A Potential Catch for Amazon
Package delivery drones
There is no shortage of potential benefits for Amazon (AMZN) in investing in a wireless service with Dish Network (DISH) or any other partner. In addition to being able to add a phone plan to Prime subscriptions, Amazon could also use the wireless investment to strengthen its other operations.
For example, the company could use the wireless network to enhance the operations of its package delivery drones. Amazon has shown that it is planning to deploy drones to deliver customer orders to reduce delivery time and cut operating costs.
Interested in AMZN? Don't miss the next report.
Receive e-mail alerts for new research on AMZN
Shipping expenses are among Amazon’s rising operating costs, as the company relies on third-party shippers to deliver orders to customers. The chart above shows how Amazon’s shipping costs have trended over the last five quarters.
Efficient delivery system
Although using drones and a wireless network could help make Amazon’s delivery system less expensive and more efficient, funding the building of a wireless network could come at a steep cost to the company.
According to reports about the Amazon–Dish discussions, Amazon would contribute capital toward establishing a wireless network using Dish’s spectrum.
Costs of building a wireless network
If network investments by carriers such as Verizon (VZ), AT&T (T), T-Mobile (TMUS), and Sprint (S) are any guide, the cost of setting up a reliable wireless network could be considerable. As such, financing a wireless venture with Dish could dramatically increase Amazon’s expenses.