Google will invest up to $1 billion in Bharti Airtel through a mix of equity and commercial partnerships in areas like affordable smartphones, networks, and cloud.
This is the tech giant’s second investment in an Indian telecom service provider (after Reliance Jio) and is part of its $10-billion India digitisation fund. Discussion between the two companies had been going on since the first half of 2021 and culminated in an announcement on Friday.
The $1-billion commitment includes an equity investment of $700 million (Rs 5,224 crore). Shares will be issued to Google on a preferential basis at Rs 734 apiece and will give Google a 1.28 per cent stake in the company. The deal price is at a 2.5 per cent premium to Airtel’s stock price of Rs 715.90 on Thursday.
Additionally, Google will set aside $300 million for potential investment in areas like smart phone access, networks, and cloud. The investment will help Airtel to offer a wide range of affordable devices to consumers.
Airtel Chief Executive Officer Gopal Vittal said the company had no plans to develop its own exclusive smartphone. It will work with partners, including lenders, device manufacturers, and e-commerce companies, to improve the availability of smartphones, he added.
The company is also using software tools and data models that predict customer purchase trends and allows for targeted offers. Airtel has more than 190 million 4G customers, adding nearly 80 million users in the past two years.
The other two areas of collaboration are 5G and cloud. Both companies will potentially co-create India-specific network domain use cases for 5G and other standards. Airtel uses Google’s 5G-ready Evolved Packet Core and software defined network platforms.
They will also focus on shaping and growing the cloud ecosystem in India to accelerate their digital transformation journeys, the companies said.
Vittal said Airtel was spending $2.5 billion each year on capex and would continue to invest in areas like home broadband, data centres, and 5G services. “This (Google investment) will fire up our digital agenda. And that’s where we will double down and really go deep,” he said.
He added the company had a comfortable leverage situation and was generating adequate cash flows. Vittal said there would be no conflict due to Google’s investment in Jio.
“We partner several companies just as Google does. In India you do need a multi-pronged approach to drive the adoption of digital,” he said.
In July 2020, Google had picked up 7.73 per cent in Jio Platforms, investing $4.5 billion (Rs 33,737 crore) in the company. The two companies also launched an affordable smartphone, the JioPhone Next, last November. The phone launch was part of Jio’s ambition to grab a larger share of India’s smartphone market.
“The Google-Airtel deal further consolidates the industry theme that telcos are focused on — transforming their business model from a pure voice-only mobility service provider to a complete digital solution provider. Partnerships with large global technology service providers would only fast-track the process,” said Prashant Tarwadi, director (corporates), India Ratings and Research.
“We believe that non-mobility offerings such as enterprise solutions (B2B), e-payment wallets/platforms, music and OTT (over the top) applications and broadband services, will now become the core offerings in the medium term unlike before, which would ensure customer acquisition and customer stickiness, and strengthen the market footprint of telcos,” he added.
Prabhu Ram, the head of industry intelligence at market research firm CMR, said: “Google will support Airtel’s ongoing moves to enable smartphone affordability and, in doing so, hasten India’s digital transformation.”
The important aspect of the partnership is to create India- centric 5G use cases, said Tarun Pathak of Counterpoint Research. Bank of America advised Google in the transaction.
