Amazon Kindle's Switch To AT&T Network A Blow To Sprint
By Roger Cheng, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Amazon.com Inc.'s (AMZN) decision to switch to AT&T
Inc. (T) as the wireless provider for its newest Kindle is a blow to Sprint
Nextel Corp. (S), which could be left as a jilted partner for future e-reader
models.
The Kindle has long been Sprint's high-profile model for its connected devices
business, which provides wireless service to products that aren't phones.
While revenue from the deal wasn't significant, Sprint Chief Executive Dan
Hesse would often point to it in his claim that the carrier was a leader in the
area. But the company's larger rivals have been pushing hard to establish their
own foothold in the business, signing buzz-worthy partnerships of their own.
On Wednesday, Amazon.com unveiled a new Kindle with international access,
which uses a global standard called GSM that is powered by AT&T. The online
retailer also cut the price of its older Kindle - which uses Sprint's service -
by $40 to $259. Existing Kindles will continue to use Sprint's service, but it's
unclear what their relationship will be like for future devices.
AT&T has a "long-term strategic agreement" to power the Kindle, according to
Glenn Lurie, head of the company's emerging devices business.
Sprint continues to have "strategic discussions on an ongoing basis" with
Amazon.com, said Danny Bowman, who similarly oversees Sprint's connected devices
business.
Amazon.com declined to comment on its future Kindle plans.
The expansion to global access is a natural move by Amazon.com because Kindle
users are typically more sophisticated and are more likely to travel overseas.
As the user base has grown, so have the demands on the e-reader. Amazon.com's
decision to use AT&T and its broader access to the international network
underscores the domestic limitation of Sprint.
"Device manufacturers are certainly increasingly conscious of maximizing their
addressable market," said Daniel Hays, telecom analyst at the consulting firm
PRTM. "As such, most of them are trying to go with network technologies that are
most widely utilized."
The opportunity to connect multiple devices - from digital cameras to
residential power meters - is a hot topic at the CTIA wireless industry trade
show. Ahead of the show, which began Wednesday, Sprint said it had created a
unit focused on the area. A few months ago, Verizon Wireless - jointly owned by
Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD) - formed a joint
venture with Qualcomm Inc. (QCOM) to foster the development of connected
devices.
The market is still in its infancy, so there remains for the players to each
grow. But Kindle's decision to switch underscores the increasing competition in
the area.
"Are we going to bump into each other? Of course we are," Lurie said.
In many cases, global access may be an advantage that AT&T has over Sprint, as
well as Verizon Wireless, which uses the same network technology as Sprint.
"Many [original equipment manufacturers] will want to bet on a device that
works around the world," Lurie said.
Sprint, however, has lower operating costs, and does have an opportunity to
target low-cost devices that don't need to go overseas. Earlier Thursday, the
company said it would begin offering a service that would allow businesses such
as cable providers or smaller traditional telephone companies to more easily run
a wireless resale business under their own brands.
The company said the offering, in which Sprint would handle many of the back
office tasks that have plagued resellers in the past, would remove the
historical barriers to entry to the wireless business.
Bowman acknowledged that Sprint's rivals had done a better job in recent
months of touting their flashy partnerships. He predicted the company would have
a number of "exciting" partnerships of its own to announce in the coming months.
"It's about doing a better job of getting our name out," he said.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
(END) Dow Jones Newswires
10-08-091559ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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