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Google to invest $1 billion in Airtel, pick up 1.28% stake

🔴 This will comprise the $700 million equity investment in Bharti Airtel at a price per share of Rs 734 (the scrip opened trading on Friday at Rs 718 on the BSE), and up to $300 million that will go towards implementing commercial agreements.

By: ENS Economic Bureau | New Delhi |
Updated: January 29, 2022 12:22:55 am
A girl checks her mobile phone as she walks past the Bharti Airtel office building in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India April 21, 2016. (REUTERS/File Photo)

AIMING TO build 5G specific use-cases and bring affordable smartphone offerings to the market, mobile services firm Bharti Airtel and Google announced a long-term agreement Friday that would entail the American internet giant investing $700 million for 1.28 per cent stake in the Delhi-based company, in addition to up to $300 million towards potential multi-year commercial agreements.

“Airtel and Google share the vision to grow India’s digital dividend through innovative products. With our future ready network, digital platforms, last mile distribution and payments ecosystem, we look forward to working closely with Google to increase the depth and breadth of India’s digital ecosystem,” Sunil Bharti Mittal, chairman of Bharti Airtel, said in a statement. Google’s biggest investment in India, however, was a $4.5 billion infusion in Airtel’s chief rival Reliance Jio back in 2020 for which it picked 7.73 per cent stake. The deal also involved building of an entry-level 4G smartphone that was launched last year.

Google said it intends to invest up to $1 billion, as part of its Google for India Digitization Fund, which includes equity investment as well as a corpus for potential commercial agreements, to be identified and agreed on mutually agreeable terms over the course of the next five years. This will comprise the $700 million equity investment in Bharti Airtel at a price per share of Rs 734 (the scrip opened trading on Friday at Rs 718 on the BSE), and up to $300 million that will go towards implementing commercial agreements.

According to a statement, as part of the first commercial agreement, Airtel and Google will work together to build on Airtel’s extensive offerings to consumers, that cover a range of Android-enabled devices, via innovative affordability programmes. The companies also said they would work to explore further opportunities to bring down the barriers of owning a smartphone across a range of price points, in partnership with various device manufacturers.

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In an analyst call, Airtel’s CEO Gopal Vittal clarified that the company does not plan to build its own smartphone on the lines of Jio, but will partner with smartphone makers to bring affordable offerings to the market. “Our strategy is to drive smartphone adoption… but we are not keen on the subsidy game. We want to be competitive in the market. We have developed software to target devices with incentives to minimise the cost,” Vittal said.

Airtel is already using Google’s 5G-ready Evolved Packet Core & Software Defined Network platforms, and plans to explore scaling up the deployment of Google’s network virtualisation solutions to deliver a “superior network experience” to their customers. Under the larger strategic goals of the partnership, both companies will also potentially co-create India-specific network domain use cases for 5G and other standards, with cutting-edge implementations, the statement said, adding that both Airtel and Google will also focus on shaping and growing the cloud ecosystem in India.

Sundar Pichai, CEO of Google and Alphabet, said: “Our commercial and equity investment in Airtel is a continuation of our Google for India Digitization Fund’s efforts to increase access to smartphones, enhance connectivity to support new business models, and help companies on their digital transformation journey”. Analysts pegged that for Google, in addition to potentially hedging its bets by investing in rival telecom operators, the deal could present opportunities to create front-end solutions in accelerating Android adoption in the country, especially in the low-end market that is still dominated by feature phones.

“Bharti could leverage Google’s tech platform to explore monetisation of digital offerings. It could leverage the opportunity of a large pool (>300m) of feature phone subscribers in the market through Google-enabled affordable devices. It could leverage Google’s 5G technology solutions to offer use cases to SMEs/ consumers including cloud services. Over time, it can drive big value via new growth areas. From Google’s point of view, it is seeing the advantage of tying up with a large telecom provider to create front-end solutions,” said Aliasgar Shakir, telecom analyst, Motilal Oswal Financial Services.

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