Internet giant Google will invest up to $1 billion in Bharti Airtel, India's second-largest service provider, by acquiring 1.28% of Airtel's equity and in other commercial agreements on mutual terms over the next five years.
The deal includes an investment of $700 million to acquire a 1.28% stake in Airtel and up to $300 million for multi-year commercial agreements. This investment is part of Google for India Digitalization Fund, announced in 2020. It seeks to invest $10 billion to help advance digitalization in India over the next five to seven years. The deal is subject to required regulatory approvals.
"The partnership will focus on enabling affordable access to smartphones across price ranges and will continue to explore building on their existing partnerships to potentially co-create India-specific network domain use cases for 5G and other standards, and help accelerate the cloud ecosystem for businesses across India," said the press release issued by Airtel.
As per media reports, Airtel's CEO Gopal Vittal clarified that the company will not be working with Google to develop affordable smartphones but will be working with device partners to bring down the prices.
Google-Jio versus Google-Bharti
Google seems to be the only company that has invested in both arch-rivals, Jio and Airtel. Google had invested $4.5 billion in Jio Platforms in 2020 for a 7.73% stake. The two companies had also collaborated for an affordable 4G smartphone, JioPhone Next, which was launched in November last year.
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Further, Google was in the news some time back for a possible investment in Vodafone Idea, India's third-largest service provider. Vodafone Idea has been trying to acquire investment for almost two years now. The company gave away almost 36% of its ownership to the government earlier this month.
This is not the first time Google and Airtel have collaborated. The two companies announced a partnership in 2013 to provide Bharti Airtel's subscribers free access to some of Google's products.
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What does it mean for Google and Airtel?
It is easy to understand the growing interest of global internet giants, like Google and Facebook, in the growing Indian digital ecosystem. With 50% of the country's population, around 600 million people, yet-to-be-connected, India is a massive market for internet companies. Further, the Indian digital ecosystem is fast maturing with growing data consumption and Covid-led digital transformation of enterprises, especially small and medium businesses.
For Airtel, the funds will be vital as it gets ready to participate in 5G auctions and prepares the network for 5G. It also needs to expand the 4G network to address growing data consumption. Further, Airtel will need all the funds to compete with Mukesh Ambani-led Reliance Jio, a highly aggressive player. The competition between the two players is likely to grow this year with the launch of 5G services.
Airtel is already using Google's 5G-ready Evolved Packet Core (EPC) and software defined network platforms, says the press release. The two companies also plan to explore scaling up the deployment of Google's network virtualization solutions.
"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," said Sunil Bharti Mittal, Chairman of Bharti Airtel.
"Airtel is a leading pioneer shaping India's digital future, and we are proud to partner on a shared vision for expanding connectivity and ensuring equitable access to the internet for more Indians," said Sundar Pichai, Chief Executive Officer, Google and Alphabet, in a statement.