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Home / Business News / US tech firms make a beeline for foothold in Indian telecom

US tech firms make a beeline for foothold in Indian telecom

Analysts say the discussions and buzz around partnerships between technology and telecom companies could mark a strategic shift, especially in the e-commerce sector.

business Updated: Jun 05, 2020 03:48 IST
Romita Majumdar and Leroy Leo
Romita Majumdar and Leroy Leo
Hindustan Times, Mumbai/New Delhi
Amazon is reportedly in talks to buy a 5% stake worth at least $2 billion in Bharti Airtel.
Amazon is reportedly in talks to buy a 5% stake worth at least $2 billion in Bharti Airtel.

US technology companies appear to be seeking a foothold in India’s telecom sector through acquisitions of minority stakes that could potentially shore up the fortunes of both.

This comes at a time when India’s online retail industry is seen at an inflection point due to the coronavirus pandemic, which has sharply boosted adoption of digital services.

Analysts say the discussions and buzz around partnerships between technology and telecom companies could mark a strategic shift, especially in the e-commerce sector.

According to a Morgan Stanley report released earlier this week, India’s e-commerce population could grow sharply post covid-19 and online penetration in grocery shopping could finally reach an inflection point, along with a surge in segments such as gaming, educational and health tech, as well as cloud services.

“We believe we could see the emergence of a few large tech companies (Super Apps or category leaders) in the next 5-10 years. These developments are notably important for some of the global tech companies that are invested in India,” according to the report.

On Thursday, Reuters reported that Jeff Bezos’ e-commerce giant Amazon.com is in early-stage talks to buy a roughly 5% stake worth at least $2 billion in Bharti Airtel Ltd, a move that could give India’s third-largest telecom company a financial boost in this hyper-competitive market.

“If the Amazon-Bharti Airtel deal happens, it may help Amazon leverage Airtel’s subscriber base to cross-sell its services. Organically, it may take Amazon years to reach such a chunky (user) base, but in any form of partnership, it could be sooner,” said Rajiv Sharma, head of research at SBICAP Securities.

Bharti Airtel would also gain from a potential alliance with Amazon, whose subsidiary Amazon Web Services (AWS), leads the global cloud services market, according to analysts.

Airtel could also benefit from Amazon’s purchase-level insight due to its e-commerce services.

“From an India perspective, ...between Facebook MarketPlace, Google Shopping and the Amazon marketplace, the latter has the maximum purchase-level insight,” said S. Swaminathan, chief executive and co-founder of Hansa Cequity, a digital marketing and analytics firm.

The news about a potential Amazon-Airtel alliance comes on the back of Facebook picking a 9.99% stake in Jio Platforms Ltd for $5.7 billion. India’s largest mobile operator Reliance Jio Infocomm Ltd is a wholly owned unit of Jio Platforms, which in turn is owned by Reliance Industries Ltd.

Multiple private equity deals including KKR, General Atlantic, Vista Equity Partners and Silver Lake, followed the Facebook deal, which resulted in RIL securing an investment upwards of $10 billion.

Last week, it was reported that another technology behemoth, Alphabet Inc.’s Google, is in talks with Vodafone Idea Ltd for a potential stake purchase.

However, Vodafone Idea on Thursday said “currently there is no proposal as reported by the media that is being considered at the board”.

For telecom companies, the benefits from such deals is obvious. They garner funds to grow their war chest in a capital-intensive sector that has seen cutthroat competition since Reliance Jio’s entry in September 2016.

This would be especially important for Vodafone Idea, which has been struggling with its cash reserves.

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