Amazon, Inphonic partner to sell wireless service plans

MarketWatch writes that Amazon is teaming up with InPhonic, "which has the largest online presence through its store WireFly, to sell mobile telephones and service plans." Roger Entner at Ovum said, "It's basically an admission that Amazon can sell books really well over the Internet, but they can't sell phones very well."

Under the terms of the deal, "WireFly will be integrated into Amazon's Web site starting in the third quarter. In exchange, InPhonic will pay Amazon a fee, partly based on advertising, and also based on a one-time fee for each phone activated through the partnership. The agreement is believed to be for five years. The fees could amount to $4 million to $5 million the first year, and potentially ramp up as more phones are sold. Amazon also will receive some InPhonic warrants that could eventually be converted into shares worth its current price."

Entner said, "It's another feather in the cap for InPhonic; another marquee name has chosen it as a partner." Entner estimated "Wirefly has a market share of 60% to 70% of online sales." He added, "It's dominant."

According to the article, "WireFly is able to fill some service gaps that Amazon was lacking. Amazon can't activate the phones it sells, it doesn't sell family plans and it leaves customers to go through the carriers themselves to retain their own local phone numbers. Amazon also has no customer service line that deals specifically with cellphones and service plans."