Amazon.com, Inc. (AMZN): The Only Place It Can Go

It’s nearly a certainty at this point that e-tail giant Amazon.com (NASDAQ:AMZN) is preparing to launch a smartphone, which is now casually known as the “Kindle Phone.” This isn’t just unfounded speculation anymore; there’s plenty of evidence that such a device is en route.

CEO Jeff Bezos has all but confirmed his interest in pursuing a smartphone, saying the hardest part will be to remain differentiated and not simply be another “me, too” device. Over the past couple of years Amazon.com (NASDAQ:AMZN) has also been slowing hiring smartphone talent in the form of former Microsoft Corporation (NASDAQ:MSFT) Windows Phone execs.

Make no mistake: a Kindle Phone is coming. But where is it going?

Where in the world is Amazon’s content?
When it comes to geographical regions, Amazon.com (NASDAQ:AMZN)’s content offerings are strongest in the U.S., with little to nothing in most other parts of the world. Amazon has been expanding recently, most notably and naturally with e-books, but its music, TV shows, movies, and apps availability is focused primarily in the U.S. with a pinch of European offerings.

Amazon.com (NASDAQ:AMZN) will have to launch the Kindle Phone in the U.S. first, since it won’t seek hardware margins and will rely on its content catalog.

The process of elimination
Of the four primary carriers, chances are that Verizon Communications Inc. (NYSE:VZ) Wireless and Sprint Nextel Corporation (NYSE:S) won’t be carrier partners since they operate CDMA networks. If Amazon wants to truly be disruptive, it will follow in Google Inc (NASDAQ:GOOG)‘s footsteps and try to sell its device unsubsidized, unlocked, and off contract. Unlocked smartphones are typically GSM models because they have easily swappable SIM cards, leaving just AT&T Inc. (NYSE:T) and T-Mobile.

Amazon.com (NASDAQ:AMZN) already has deals with AT&T Inc. (NYSE:T) as the service provider for its cellular-equipped tablets, and Amazon even finagled some incredibly cheap data plans, albeit with small data allowances. However, AT&T has always been predominantly an Apple Inc. (NASDAQ:AAPL) iPhone carrier — a trend that has intensified over the years.

Source: SEC filings and conference calls.

Last quarter, the iPhone comprised 84% of all smartphones activated on Ma Bell’s network. Amazon might launch on AT&T, but there’s not a lot to go around outside of Apple Inc. (NASDAQ:AAPL)’s flagship, especially since AT&T is deeply entrenched in the subsidy model that I’m assuming Amazon is trying to skirt.