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Google to Invest $1 billion in Airtel

  • Google will invest $1 billion in Airtel under a recent partnership deal, with $700 million for direct equity purchase and the remaining through commercial agreements

  • Airtel is the second-largest service provider in India and intends to diversify its product offerings through this partnership

  • Tech leader Google will focus on the deployment of its enterprise-level solutions and further penetration into the Indian consumer electronics market

Google to Invest $1 billion in Airtel

Published: January 2022
Source: GlobalData

On January 27, 2022, Google announced an investment of up to $1 billion in Airtel India under a partnership agreement both companies entered into recently. The announcement follows the recent expansion of Google’s cloud computing arm in India. These investments are part of the India Digitization Fund of $10 billion set up by Google in 2020. Google is using the “Digital India” policy set by the Indian government that exemplifies its strategy to be part of the external business environment, especially in emerging economies. Bharti Airtel, generally recognized as “Airtel”, faced many obstacles in recent years, with the most challenging one being price wars among Indian telcos. This deal presents ample opportunities for both parties in their non-core business areas.

The deal has two components - Google will buy a 1.28% stake in Airtel valued at $700 million, and the remaining through commercial agreements in the future, focused on digital inclusion in India. Through commercial agreements, both companies will explore the 5G ecosystem in India and partnerships with smartphone device manufacturers.

Airtel and the Indian Telecom Market

Airtel is the second-largest service provider in the Indian telecom market. Recently, the Indian telecom market was in turmoil owing to the price war, which resulted in consolidation. However, Airtel scraped through and maintained its market share – 27% share in total mobile subscriptions in 2020, according to GlobalData. Airtel faces intense competition from Reliance Jio, the market leader, and Vodafone Idea, which was formed through the merger of two large telecom companies. The investments could provide impetus to Airtel’s efforts to seize the 5G opportunity in India, along with the deployment of Google’s network visualization solutions. The small and medium businesses supported by Airtel could also expect a superior cloud system in the future.

Google and the Indian Smartphone Market

Google created the world’s most-used mobile operating system “Android”, but when it comes to hardware solutions, it has struggled to capture the market. According to GlobalData, smartphone penetration in India stood at 45% in 2020 and is expected to grow beyond 70% by 2025. Through this investment, Google expects to penetrate the price-sensitive Indian smartphone market. To enter the affordable smartphone market, Google, along with Airtel, is expected to enter into partnerships with other smartphone manufacturers in the future.

For telecom and technology companies, population is the most important factor that determines lucrative markets. India has the world’s second-largest population, with more than half under the age of 25 years. At the same time, the purchasing power of the Indian consumer is increasing, which indicates huge potential for the growth of Airtel and Google. The Indian government’s policies of digital inclusion and promotion of newer technologies such as 5G and fiber networks can become catalysts for the future of this partnership.

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