Amazon May Dial Into Cellular Service. Here's What That Could Mean For You.

E-commerce giant Amazon (AMZN) is said to be considering a free or discounted mobile service for its Prime members, in a move that could impact its customers and shareholders of wireless service providers.

Amazon and Mobile Service? How Would That Work?

Bloomberg reported that Amazon wants to deliver the service using a Mobile Virtual Network Operator (MVNO) model—meaning it can provide the service using the infrastructure of an existing wireless provider. Google (GOOGL) currently offers an MVNO with its Google Fi Wireless service which operates on the T-Mobile network. Some features of Google’s service are phone payment plans and data deals for up to four people aimed at families.

Tech companies are increasingly looking at ways to diversify their product streams into non-core businesses to keep their core customers close to the platform. Apple (AAPL), for example, is venturing into consumer finance with products such as a high-yield savings account.

For Amazon, cheap mobile deals may close the service loop by providing ancillary cell service to customers already using the company for their entertainment (Amazon Prime Video, Audible, Music) and shopping needs.

Mixed Bag For Investors

Amazon's mobile service would not be the first time it has sought to diversify from its core business after a move into grocery delivery with the Whole Foods acquisition and the ill-fated attempt to offer healthcare services with the now-defunct Amazon Care and Haven, the health-insurance venture with JPMorgan (JPM) and Berkshire Hathaway (BRK.A).

For investors, Amazon can increase its footprint in another industry and the MVNO model will allow a low-cost entry to the wireless sector since it will be using someone else's infrastructure rather than setting up its own.

Although Amazon is in talks with a few telcos to provide the network for its offering, shares in some of those stocks were lower on the news.

Verizon (VZ) and AT & T Inc. (T) shares were lower by about 4% each while T-Mobile Inc. (TMUS) stock dropped about 6.7% as of 12:30 p.m. ET. Amazon shares were up a little over 1.5% but Dish Network (DISH) shares soared more than 20%.