Global internet giant Google is looking to buy up to 5 per cent stake in debt-laden Vodafone Idea, the Financial Times reported Thursday. Google’s parent company Alphabet Inc is also looking to buy some stake in Vodafone Idea’s rival Reliance Jio Infocomm, the newspaper reported, without providing details.
The report comes almost a month after social media giant Facebook picked up 9.9 per cent stake for Rs 43,574 crore ($5.7 billion) in Reliance Industries Limited’s (RIL) Jio Platforms. Jio Platforms, a wholly-owned subsidiary of RIL, has since seen investments from global private equity players such as General Atlantic, Silver Lake Partners, Silver Lake Partners and KKR.
“If you look at the timing, the Google deal with Vodafone Idea is a win-win for both. Nobody wants Vodafone Idea to go belly-up, and it is certainly not completely out of the woods yet. So it gets the desired money to survive. On the other hand, Google gets a cheap entry into the market and can bring its expertise in data to benefit from a growing wireless user base,” said a telecom analyst, who did not wish to be identified.
A deal with Google could be a lifeline for Vodafone Idea, which owes as much as Rs 54,000 crore in adjusted gross revenue (AGR) dues to the government.
Following a Supreme Court judgment on October 24 last year, Vodafone Group’s chief executive officer Nick Read had said that the company, which holds 49 per cent stake in Vodafone Idea, would not commit any more equity in India as the “country effectively contributed zero value to the company’s share price”.
Vodafone Idea chairman Kumar Mangalam Birla had said that it might have to shut shop if there was no AGR relief from the government, as it did not make sense to “put good money after bad”.
A potential deal between Google and Vodafone Idea will heat up competition in one of the world’s largest and fastest growing data consumption markets, experts said. As of January 31, 2020, India had a total of 115.6 crore wireless telephone subscribers, with a net addition of up to 50 lakh users per month, according to data from Telecom Regulatory Authority of India (TRAI).
The three private players, Vodafone Idea, Bharti Airtel, and Reliance Jio, together held nearly 90 per cent share of the domestic telecom market. Though it has been losing subscribers for over six quarters now, Vodafone Idea had a 28.4 per cent share of the domestic market as of January 31, 2020.
The number of active internet users in the country stands at 500 million, and is expected to grow by another 100 million users within the next three years, according to experts.
With a data market as big as India, experts said that it was only a matter of time before all the global internet giants tried to enter the domestic arena in one way or the other.
“We do not know the details yet, but this could be a world of convergence. Vodafone and Idea got together in the first place due to Jio. Now if Jio can tie up with Facebook, others will also have to find similar deals,” said a Supreme Court lawyer for one of the telecom majors.
To push internet usage in India, Google had in 2015 tied up with the Ministry of Railways to provide free unlimited high speed Wi-Fi at 400 railways stations. But with the project yielding limited success, the company said last year that it would wind down the service.
Facebook had also tried to get a share of the Indian internet pie. In 2015, it experimented with Free Basics, which provided free access to basic Internet services as a partnership with service providers. However, it soon pulled out after differential pricing was disallowed by the telecom regulator.