Bharti Airtel, India’s second-largest telecom operator, announced on Friday that US technology giant Google would provide it with investment of up to $1 billion.
The deal involves investment of $700 million to acquire 1.28% ownership in Airtel and up to $300 million toward potential multi-year commercial agreements.
For the stake, a preferential offer of 71 million equity shares would be made to Google International at a price of 734 rupees ($9.78) per share.
Airtel’s major owners – the Mittal family and Singtel – hold 55.93% of the telco while the balance is publicly held. The Mittal family directly and indirectly owns around 24.13%, while Singtel holds 31.72%.
The commercial agreements would include investments in scaling Airtel’s offerings that covers a range of devices to consumers via innovative affordability programmes as well as other offerings aimed at accelerating access and digital inclusion across India’s digital ecosystem, the company said.
India Digitisation Fund
The investment would be part of the Google for India Digitisation Fund, a $10 billion initiative involving equity investments, partnerships, and operational, infrastructure and ecosystem investments announced by Google CEO Sundar Pichai in 2020.
The partnership, the telecom operator said, will also focus on enabling affordable access to smartphones across price ranges, and would continue to explore building on their existing partnerships to potentially co-create India-specific network domain use cases for 5G and other standards.
“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,” Bharti Airtel said in a statement.
“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.”
The initiative would also help accelerate the cloud ecosystem for businesses across India.
Airtel said it serves more than 1 million small and medium-sized businesses with its enterprise connectivity offering, and this partnership would help accelerate digital adoption.
“Airtel and Google share the vision to grow India’s digital dividend through innovative products,” Sunil Bharti Mittal, chairman of Bharti Airtel, said.
“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,” he added.
Pichai said Airtel has been a pioneer in shaping India’s digital future, and Google’s commercial and equity investment in Airtel would be a continuation of Google’s efforts “to increase access to smartphones, enhance connectivity to support new business models, and help companies on their digital transformation journey”.
The Airtel investment is Google’s second big-bang investment in the country’s scorching telecom sector in as many years. In 2020, Google invested $4.5 billion in Jio Platforms, acquiring a 7.73% stake in the company. That was the first investment from Google’s India Digitisation Fund.
“[Google’s Airtel investment] seems similar, with a focus on affordable Android devices,” said Mumbai-based Shiv Putcha, founder and principal analyst at Mandala Insights, an independent telecom analyst firm.
Google and Jio Platforms agreed to jointly develop an entry-level affordable smartphone with optimisations to the Android operating system and the Play Store, an effort that would help millions of users in India become owners of smartphones.
Meanwhile, analysts believe that the investment is a win-win for both.
“Google and other over-the-top players have an obvious synergy with physical infrastructure providers like telcos,” Mahesh Uppal, a director at ComFirst, a regulation and policy consultant in New Delhi, said.
“Google too has products – fibre and data centres – and services that it can leverage better through commercial relationships with Indian telcos [like Jio and Airtel],” he added.
“Google’s investments in Airtel would also help the telco’s financials ahead of a 5G spectrum auction expected in the middle of the year,” Uppal said.