India's Airtel gets $1B deal boost from Google

Internet and technology bellwether Google will invest up to $1 billion in Bharti Airtel, India's second-largest service provider.

As part of the agreement, Google will spend $700 million acquiring a 1.28% stake in Airtel, and will spend another $300 million over the next five years on commercial agreements.

The two companies will work together on various fronts, including accelerating the cloud ecosystem for enterprise, enabling affordable access to smartphones across different price ranges, and also creating India-specific use cases for 5G and other standards.

Figure 1: Google will spend $700 million acquiring a 1.28% stake in Airtel, and another $300 million over the next five years on projects.
(Source: Steve Jurvetson on Flickr CC2.0)

However, unlike its partnership with Reliance Jio, Google and Airtel will not be developing an affordable smartphone, but instead working with device makers to bring down cost.

This investment is part of the Google for India Digitization Fund, announced in 2020. As part of this initiative, the company will be investing $10 billion in several initiatives to support the digitization of the country.

Significantly, Airtel also revealed that it is "already using Google's 5G-ready Evolved Packet Core and Software Defined Network Platforms and plans to explore scaling up the deployment of Google's network virtualization solutions."

Old friends

Airtel and Google have collaborated in the past. In 2013 they entered into a partnership to provide Airtel's subscribers free access to some of Google's products. And they partnered, along with Cisco, in 2021 to offer products to small and medium enterprises.

"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, Google and Alphabet CEO, in a statement.

Google has also invested in Reliance Jio, India's largest service provider. It acquired a 7.73% stake in Jio by investing $4.5 billion in 2020. The two companies produced the JioPhone Next, an affordable 4G smartphone.

"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," says Sunil Bharti Mittal, chairman of Bharti Airtel.

Why is it relevant?

With almost 700 million people yet to be connected, India is an incredibly lucrative market for hyperscalers like Google, Amazon and Facebook.

Besides this, COVID-19 has pushed Indian enterprises to digitize operations, and this has increased the enterprise market size.

Forming associations with service providers helps internet companies promote their products, and gives them access to new internet users.

This is especially true because India is a mobile-first country for the Internet – in other words a significant percentage of the population start using the internet for the first time on mobile.

Most of the yet-to-be-connected people are in remote and rural areas, and this population will likely use mobile to access the Internet. Collaborating with Airtel helps Google ensure that these new users will use Google products.

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They are also able to ensure that a growing number of enterprises use their products as digitization gathers pace.

Meanwhile, Airtel will be able to use the funds to expand the 4G network to move its 2G subscribers over, and also upgrade and modernize its network for 5G.

Over the past few months, Airtel has enhanced its focus on the enterprise segment, and some of the funds might be used to develop 5G use cases for the more lucrative enterprise market.

It is hard not to think about Vodafone Idea, India's third-largest service provider, which has been struggling to acquire investment for quite some time now, while its rivals are easily able to attract funds.

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— Gagandeep Kaur, contributing editor, special to Light Reading