Google has announced plans to invest up to $1 billion in Bharti Airtel as part of its Google for India Digitisation Fund, according to a press release by Airtel. The equity investment which will see Google pick up a 1.28 per cent stake will be carried out at $700 million at a share price of Rs. 734, the release added.
The corpus of $300 million will be kept aside for commercial agreements which will be “identified and agreed on mutually agreeable terms over the course of the next five years”, the company said. It is not clear how the deal will materialise or how Airtel plans to leverage Google’s expertise.
Airtel CEO Gopal Vittal had revealed in an earnings call last year that the company was in talks with OEM manufacturers, Google, as well as software developers to see how it can compete on handsets without taking inventory positions and manufacturing its own devices.
The deal will let Airtel come up with smartphones bundled with new services and customised software, which may entice users to migrate from feature phones to smartphones, according to the Economic Times, but Airtel will have to rely on its hardware partners to enable overall device affordability, which is going to be challenging at a time of global supply chain disruptions, the report added. It is unclear where exactly Google will come in but its partnerships with OEM manufacturers will be key to Airtel.
The investment may be seen as Google’s attempt to double down on its plans to make inroads into India whereas it will provide Airtel with the necessary funds to take on Jio and service its spectrum and AGR dues.
Does the deal share similarities with Google’s investment in Jio?
Google’s investment of Rs. 33,737 crore in Jio Platforms (US$4.5 billion), was announced by Reliance Industries Managing Director Mukesh Ambani during the company’s online Annual General Meeting last year. It was the second biggest external investment received by Jio after Facebook invested Rs. 43,647 crore (US$5.7 billion) in the company.
Reliance launched a new 4G smartphone that it touted as the most affordable one in the world. The JioPhone Next smartphone was built in partnership with Google and runs an optimised version of Android. The company claimed that the smartphone’s affordability will convince millions of 2G mobile users to buy JioPhone Next as the upgrade costs are high at current smartphone prices. The handset is priced at Rs 6,499. The company has not released details about the performance of its handset.
Moreover, it was also announced that Google Cloud will power Reliance’s 5G network and move its core retail businesses to Google Cloud allowing it to “take advantage of Google Cloud’s scalable infrastructure thereby enabling its retail business to achieve better operational efficiency, modernise and scale for growth, and deliver better performance and experiences to customers.”
The agreement shares striking similarities with Airtel’s deal and raises concerns about conflict of interest which were dismissed by Airtel CEO Gopal Vittal in an interview.
“As far as the question goes on the conflict of interest of Google, we partner with several companies, just as Google partners across several companies, and like I mentioned in India, you do need a multi-pronged approach to drive adoption of digital,” Vittal said. “It’s a complex problem and our partnership is really focused on driving mutually agreed objectives with a shared vision,” he added.
Given that it is unclear how Jio’s partnership with Google has benefitted either of the companies, it remains to be seen how Airtel manages to leverage the investment.
What is Airtel hoping to gain out of this collaboration?
The company said that it will look to use its partnership with Google to provide affordable smartphones and explore ways to “co-create India-specific network domain use cases for 5G” and other standards.
“This deal will be subject to necessary regulatory approvals,” the release noted.
Affordable handsets: The first commercial agreement will see Airtel and Google work on affordability programmes that can offer smartphones to Indians. “The companies will continue to explore opportunities to bring down the barriers of owning a smartphone across a range of price points, in partnership with various device manufacturers,” Airtel wrote in its release.
5G capabilities: On the 5G front, Airtel said that it already uses “Google’s 5G-ready Evolved Packet Core & Software Defined Network platforms”, while looking to augment the deployment of Google’s network virtualisation solutions. Airtel has partnered with the telecom gear maker Qualcomm for its 5G network rollout. Open RAN is a tech stack that emerged as an alternative for telcos around the world who were being dissuaded from using Chinese telecom gear from companies like Huawei and ZTE.
Is Google eyeing the cloud adoption space?
As Airtel looks to gain a foothold in the handset market, one of the opportunities that Google seeks to capitalise on, with this deal, is the cloud ecosystem for businesses across India.
“This is a way to get the Airtel commercial users onto the Google Cloud Platform. So it works for Google that way that they will try and pull many customers from the Airtel ecosystem into the Google Cloud,” an analyst told Economic Times. Google is hoping to bring the SMB market under its fold by calibrating its cloud and core offerings alongside Airtel’s offerings in connectivity and data centre space, the report added.
Airtel had announced last year that it will invest Rs 5,000 crores by 2025 towards its subsidiary, Nxtra by Airtel, its data centre business. The telco said that the capital will be used to enhance its network of hyperscale and edge data centres which includes new data centre parks in key metro cities. Nxtra is targeting an installed capacity of over 400 MW on account of this investment.
Google’s investments in India over the last two years
Google for India Digitisation Fund was announced in 2020 with a chest of Rs. 75,000 crore. Here are some of Google’s investments over the years:
- InMobi: Glance raised $145 million in a funding round back in 2020. Glance is a subsidiary of InMobi Group and owner of the short video-sharing platform— Roposo. The company used the new investment to deepen its AI capability across Glance and Roposo, expand its technology team, launch services on the platform.
- VerSe: Google invested VerSe Innovation in December 2020 along with several others including Microsoft, as per Economic Times. The total amount raised was $100 million valuing VerSe, the company behind apps like Dailyhunt and Josh, at $1 billion, the report added.
- Dunzo: Google also invested $40 million in Dunzo during its fundraising round last year, as per TechCrunch. Dunzo later saw an investment of $200 million from Reliance which also picked up a stake in the quick commerce start-up.
- Open: A neobanking startup, Open, received an investment of $100 million in a funding round with participants like Temasek, Google, Visa and Japan’s SBI Investment, TechCrunch reported. Open offers small and medium-sized businesses as well as enterprises nearly all the features of the bank with additional tools to serve the needs of a business, the website explained.
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