After its more than Rs 34,000 crore investment in Mukesh Ambani’s Reliance Jio Platforms, American internet giant Alphabet Inc’s Google could well be on its way to making “substantial investments, running into several thousands of crores of rupees”, into Bharti Airtel, Jio’s main rival.
The Sundar Pichai-led company is in “advanced stage of negotiations” with Airtel for the “past nearly one year”, and the deal size could be “substantially large”, top sources in the know of the developments told TOI.
The contours of the partnership are being worked upon for months as top executives from both companies, and their internal and external legal and M&A teams are thrashing out the finer points of the arrangement.
Queries sent to Google and Airtel remained unanswered at the time of going to press. Also, Google did not answer a question on whether its deal with Jio places any restrictions on the company from making a tie-up with a rival.
If the Google-Airtel deal does go through, it could be a huge breather for Sunil Mittal, whose company faces stiff competition in the cash-guzzling telecom sector.
Ambani had disrupted the long-held financial model of the industry, making voice – which gave 75% to the industry’s revenues then – completely free, while offering data at dirt-cheap costs, piling pressure on Airtel and the other private players such as Vodafone India and Idea Cellular. The financial stress mounted following the Supreme Court ruling on AGR.
Airtel, whose board will meet on Sunday to consider fundraising plans, remains under stress. The company had a debt of nearly Rs 1.6 lakh crore at the end of June and is unable to raise tariffs freely.
Sources said that any deal with Google will be a mega confidence booster for the company.
“The entry of Google adds strength to the balance sheet of Airtel. Also, it helps the company strategically as Google brings in innovation capabilities and strength on data analytics. Google’s data monetisation is far superior to any other company in the world, and it can help Airtel monetize its data much better to improve its realisations and profitability,” a top analyst, requesting anonymity, said.
However, the analyst added that Google would require “very strong reasons” and very-comfortable valuations to make an entry into Airtel, which also poses “strong risks” for anyone coming into the company. “If anything goes wrong tomorrow, your (Google) credibility in the market goes out even though it will be a limited liability. To save its name, the company will have to settle its dues in case Airtel is not able to move ahead due to financial pressures and starts slipping down.”