Sunday, 05 July 2020

Could Google be the saviour of Vodafone Idea?

by Harry Baldock, Total Telecom
Thursday 28 May 20

Reports suggest that Google is exploring its options regarding investment in the struggling telco

In April, Facebook ‘committed’ to the Indian mobile market, purchasing a $5.7 billion 9.99% stake in Reliance Jio. At the time, rumours suggest that Google’s parent company Alphabet was also eyeing a stake in the company, but it seems it was ultimately pipped to the post by its Silicon Valley rival…

In April, Facebook ‘committed’ to the Indian mobile market, purchasing a $5.7 billion 9.99% stake in Reliance Jio. At the time, rumours suggest that Google’s parent company Alphabet was also eyeing a stake in the company, but it seems it was ultimately pipped to the post by its Silicon Valley rival.

But it seems Google’s ambitions for the Indian mobile market have not been quelled, with a report from the Financial Times suggesting that the US tech giant may be interested in a 5% stake in struggling telco Vodafone Idea.

If such a deal were to go ahead, it would place Google and Facebook in direct competition via their Indian backed telcos, both of which boast hundreds of millions of subscribers.

The coronavirus has seen mobile usage surge in India, making its already booming digital market even more appealing for US investors. However, limitations imposed on foreign tech companies by the government have made direct operation within the country somewhat difficult, so it comes as no surprise to see that companies like Google and Facebook are taking an alternative approach to investing in the country’s digital future. 

Investment from Google could be a godsend for Vodafone Idea, which is still sweating under the weight of the enormous adjusted gross revenue fees imposed on it by the Indian government. These fees, amounting to around $4 billion, have seen the company threaten to collapse many times, with Vodafone reluctant to sink more funds into what seems like a sinking ship, despite recently contributing $200 million to Idea for payments due this September.

Could foreign investment from the US tech giant be just what Idea needs to get back on its feet? On its own, probably not. However, alongside potential incentives from the government, who do not wish to see India become a duopoly, such a deal would at least go some way to lifting the company out of the financial doldrums and get it on the path to sustainability.

 

Also in the news:  
Canada agrees to hear extradition case against Huawei CFO
Singtel’s finances take a beating citing COVID-19 and Airtel payouts
Ethio Telecom selling 45% stake as Ethiopia’s telecoms market opens up

 

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