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Google Pours $1 Billion in India’s Second-Largest Phone Operator

(Bloomberg) -- Google will invest as much as $1 billion in India’s second-largest mobile phone operator, as firms race to offer inexpensive data and digital offerings in the only billion-people-plus market still open to foreign companies.

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Alphabet Inc., which owns the Google search engine, will pay $700 million for a 1.28% stake in Bharti Airtel Ltd., the New Delhi-based company said in an exchange filing Friday. Another $300 million is part of a corpus that will be invested over five years in the areas of devices, network and cloud technologies, Gopal Vittal, Bharti’s chief executive officer for India and South Asia, said in a media call later in the day.

Asia’s third-largest economy is a key growth driver for Silicon Valley, especially after China’s crackdown on its technology sector. The move to invest in the wireless carrier could be complementary to Google’s other investment in India -- it bought a $4.5 billion stake in billionaire Mukesh Ambani’s Jio Platforms Ltd. in 2020 and has co-developed an affordable smartphone -- riding on Prime Minister Narendra Modi’s flagship ‘Digital India’ program.

Bharti’s shares surged 1.2% to 715.8 rupees on Friday after the announcement that Google was buying into the carrier at 734 rupees per share. The benchmark S&P BSE Sensex index slipped 0.1% on the day.

The investment “is a continuation of our Google for India Digitization Fund’s efforts to increase access to smartphones, enhance connectivity to support new business models, and help companies on their digital transformation journey,” Sundar Pichai, chief executive officer of Google and Alphabet said in a statement.

The funding from Google gives billionaire Sunil Mittal-led Bharti more firepower to bolster its 5G plans as well as take on Ambani’s rival telecom service which went from being a disruptive entrant in 2016 to the country’s largest wireless provider within a few years by offering free calls and ultra-cheap data.

Diversifying Bets

Google is diversifying its commitments in the $10 billion India fund following the Jio investment, according to Alok Shende, Mumbai-based principal analyst at consulting firm, Ascentius Insights. Both Bharti Airtel and Jio were safer bets, he added.

The partnership is more of a “foot-in-the-door” for the U.S. giant, Shende said, and the relationship could expand if more material synergies emerge.

Bharti is also making a big play in satellite connectivity to provide internet in hard-to-access places in India. It formed a joint venture with Hughes Network Systems’s local unit this month for satellite broadband -- an area that Ambani’s telecom unit hasn’t ventured in so far.

There’s “absolutely zero conflict of interest” around Google’s investment in Bharti, Vittal said, adding that there were no plans to build their own smartphone device.

The funds will also help Bharti, which had 355.3 million users in India as of November, gear up to buy the expensive 5G airwaves in an auction this year that will kick-start India’s journey in the super-fast networks already in use in countries like China and South Korea.

Bharti raised $2.8 billion through a rights issue in October, hiked mobile-phone tariffs in November and prepaid some airwaves-related government dues in December, as part of overall efforts to boost its balance sheet.

Rating Upgrade

“The telco may be on track for a potential rating upgrade at Moody’s” even though the reduction in debt after the Google investment might be small, Bloomberg Intelligence analysts led by Sharon Chen wrote in a note. “Bharti’s partnership with Alphabet for handsets, 5G and cloud could boost growth and better position the telco to compete with India’s top mobile company, Reliance Jio, which already works with the U.S. tech giant.”

The Indian carrier in July tied up with Intel Corp. to prepare its networks for 5G and is partnering with local conglomerate Tata Group to develop an indigenous 5G technology.

Google’s investment in Bharti is awaiting regulatory approvals, the filing said.

(Updates with Bharti CEO’s comments in the second paragraph.)

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