Google to invest $1bn in India’s second-largest mobile operator Bharti Airtel

Alphabet, which owns the Google search engine, will pay $700m for a 1.28% stake in the New Delhi-based company

Bharti Airtel office building in Gurugram on the outskirts of New Delhi, India. Bharti’s shares surged 1.2 per cent on Friday after the announcement that Google was buying into the carrier. Reuters

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.

Alphabet, which owns the Google search engine, will pay $700 million for a 1.28 per cent stake in Bharti Airtel, the New Delhi-based company said in an exchange filing on Friday.

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

Another $300m 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 for India and South Asia, said.

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 $4.5bn stake in billionaire Mukesh Ambani’s Jio Platforms in 2020 and has co-developed a cheaper smartphone — riding on Prime Minister Narendra Modi’s flagship “Digital India” programme.

Bharti’s shares surged 1.2 per cent to 715.8 rupees ($9.54) 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 per cent on the day.

The investment “is a continuation of our Google for India Digitisation 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 of Google and Alphabet, said.

The funding from Google gives billionaire Sunil Mittal-led Bharti more firepower to bolster its 5G plans as well as take on Mr Ambani’s rival telecoms 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.

Google is diversifying its commitments in the $10bn India fund following the Jio investment, said Alok Shende, 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 US company, Mr Shende said, and the relationship could expand if more material synergies develop.

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’ local unit this month for satellite broadband — an area that Mr Ambani’s telecoms unit hasn’t ventured into so far.

There’s “absolutely zero conflict of interest” around Google’s investment in Bharti, Mr Vittal said, and added 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 superfast networks already in use in countries like China and South Korea.

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

“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 US tech giant.”

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