As of now, I don't believe AMZN will enter the communication space. Prior to giving my current opinion, I want to say that I am a shareholder of AMZN, VZ, and AT&T. My opinion on whether or not Amazon will enter the communication space TMUS also came out and said that they are not in discussions about including its wireless services into a Prime package, and TMUS is already a Prime partner. Right now, AMZN is stating that there are no current plans in place to enter the communications space, and Maggie Sivon, who is a spokesperson for AMZN, said that AMZN does not have plans to add wireless services to Prime currently. Luckily, there is no hard evidence that AMZN is going to enter the communications space.
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This is speculation, but after 3 years (2020 – 2022) of AMZN allocating $164.84 billion toward its CapEx, what if it can spend less on maintaining the logistical network as it's already built? What if AMZN is in a position to cut CapEx by $15-$20 billion and decide instead of saving that capital and increasing its free cash flow, they are going to enter into the communication space and allocate $15-$20 billion toward building out a communication network? I don't know what AMZN is going to do, but history shows that AMZN is willing to spend to win, and if they are in a position to keep CapEx at the 2022 levels and reallocate to new projects, they could become a strong competitor in the communication space quickly. In 2022, Verizon ( VZ) allocated $23.22 billion toward CapEx, while AT&T spent $19.63 billion, and T-Mobile ( TMUS) spent $13.97 billion on CapEx. Now the question becomes, if AMZN does enter the communications space, will they spend to win? I think the answer would be yes, but that's an opinion. While AMZN went head-to-head with MSFT, it also went head-to-head with the incumbents in shipping and made Prime the go-to method for many Americans. In 2022 the combination of MSFT, WMT, TGT, FDX, and UPS CapEx was $59.95 billion, and AMZN outspent these 5 entities by $3.69 billion. In addition to taking on Microsoft ( MSFT) in the cloud space, AMZN decided to control its own destiny and not depend on FedEx ( FDX) or United Parcel Service ( UPS) for shipping its products when competing in the consumer goods space against Walmart ( WMT) and Target ( TGT). This happened by AMZN outspending its competitors and building the most in-depth logistical network. By building a best-in-class logistical network, AMZN was able to dominate the e-commerce space, and offer same-day delivery in some major cities, while offering next-day shipping to many areas for Prime members. AMZN realized that the consumer was valuing efficiency and how quickly they received products more and more. Look at what happened in the retail space.
This is important because CapEx is the pool of money that a company allocates toward acquiring, upgrading, and maintaining physical assets, which can include property, plants, buildings, technology, or equipment. Then in 2021, the CapEx spend increased to $61.05 billion, and in 2022 AMZN allocated $63.65 billion toward CapEx.
In 2020, AMZN's capital expenditure (CapEx) spending increased from $16.86 billion to $40.14 billion. If AMZN decides to enter the communication space I believe it will be devastating for the current communications companies. Seeking Alpha Why Amazon entering the communications space would be a nightmare for communication companiesĪMZN is willing to spend as much as it takes to win. I actually feel dollar cost averaging under $16 is a long-term gift, and if you have time on your side, AT&T may be worth hanging on to. I am negative on my investment, and I am sure many other shareholders are also. It's hard to stay bullish, and I am aware that AT&T has been a massive value trap. The market wasn't happy with the results from Q1 2023, but if you believe management projections, AT&T looks extremely undervalued. While I feel AMZN entering the communications space would be a disaster for every competitor in the communications space, I think it is unlikely they will embark on that endeavor. AMZN is the last company shareholders of T should want to collide with as they outspend the competition and have a loyal Prime membership base that isn't leaving. The latest shoe to drop was the report that Amazon ( AMZN ) was considering offering mobile service to its Prime customers. Discovery ( WBD ) shares drop -55.32% since the spinoff. Over the past decade, shares have declined -42.36%, and if that isn't enough, shareholders have seen Warner Bros.
No matter what AT&T does, it's never enough. It is hard being an AT&T ( NYSE: T) shareholder.
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