Investors and big tech are betting big on India Telco’s companies


Investors and big tech are betting big on India Telco’s companies

After Facebook acquired a 9.9% stake in India’s Jio Platforms, Google, Microsoft and Amazon are reportedly interested in the Indian telecom market.  

Top-tier investors, including the Saudi Public Investment Fund, UAE Sovereign Wealth Fund and Abu Dhabi Investment Authority, are flocking to invest in India Telco’s

As tech companies scramble for growth and hunt for their next billion users, India appears to be one of the latest global arenas for China and US tech firms. Around half a billion Indians came online in the last decade; almost the number of those offline.

US-tech companies have traditionally struggled to make much money from these users in India, the world’s second-largest Internet market with more than 600 million users.

Facebook and Google had launched connectivity efforts in India to bring more people online. While Facebook continues to maintain its Express Wi-Fi efforts in India, Google discontinued a project that allowed millions of Indians to access mobile Internet for free at more than 400 railway stations earlier this year.

In the entire race to invest in India, one company has attracted more of the investments coming into India Telco’s – Reliance Jio.

Jio is a mobile network operator in India, owned by Reliance Industries. The company provides 4G LTE services and is the only VoLTE (Voice over LTE) service provider in India as at June 2020.

Jio launched its first paid plan in July 2017 after more than three quarters of offering 4G data for free.

It is India’s largest telco with 388 million subscribers as of May 2020. It had also become the world’s fastest-growing telecom network.  (Source)

“The company would work with Jio Platforms to help small merchants and businesses come online. The two companies already kick-started their collaboration” Facebook chief executive Mark Zuckerberg said.

“Our focus will be India’s 60 million micro, small, and medium businesses, 120 million farmers, 30 million small merchants, and millions of small and medium enterprises in the informal sector,” Jio said in the statement announcing the deal.

Jio has raised $10.5 billion from top-tier global VCs and PEs, which boost its valuation to $65 billion, making it India’s second-most valuable standalone tech company after Tata Consultancy Services ($99 billion).

This is higher than the valuations of tech companies like Zoom ($42 billion), Uber ($35 billion), Twitter ($34 billion), and Airbnb ($26 billion). 

Mudabala – a sovereign wealth fund and Arabia’s Public Investment Fund (PIF) are investing $1.2 billion and $1.5 billion respectively in Jio, according to Bloomberg. Abu Dhabi Investment Authority (ADIA) has invested approximately $750 million for 1.16% of Jio.

“Clearly Jio’s platform is attracting a wide range of world-class investors, given its enormous potential to serve one of the world’s largest marketplaces,” Mubadala said in an email to Reuters.

Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA, said: “Jio Platforms is at the forefront of India’s digital revolution, poised to benefit from major socio-economic developments and the transformative effects of technology on the way people live and work”.

“The rapid growth of the business, which has established itself as a market leader in just four years, has been built on a strong track record of strategic execution. Our investment in Jio is a further demonstration of ADIA’s ability to draw on deep regional and sector expertise to invest globally in market-leading companies and alongside proven partners.” He said in the press release

Microsoft – the world’s most valuable company is in talks to invest $2 billion in the company for a 2.5% stakes while Googleis in talks with Reliance Jio Platforms and considering buying a stake of about 5% in VodafoneIdea, the second largest telecom operator in India, according to Financial Times.

Microsoft and Jio, up to now have a partnership with Microsoft’s cloud platform – Azure, hosting Reliance Jio’s data on its servers in India, as announced in August 2019 (source).  

For Microsoft, it will be an indirect path to challenging competitors like Amazon, Wallmart and Alphabet, with Jio’s access to India’s huge consumer market.

US-based investors that have invested in Jio include Facebook ($5.7 billion), Silver Lake Partners ($747 million), Vista Equity Partners ($1.5 billion), General Atlantic ($870 million), and KKR’s Asia PE Fund ($1.5 billion). Reliance has diluted about 17.1 percent equity stake in Jio. 

These investments will go a long way to advance Jio’s plan to launch an initial public offering in the US in the next 12 to 24 months according to a report on Bloomberg. A US-based IPO would give Reliance Jio and its partners a better valuation than the Bombay Stock Exchange (BSE).

“They always wanted to take Jio beyond connectivity. It was a data, technology, and ecosystem opportunity. Connectivity was just the lubricant,” Sanchit Vir Gogia, Founder and CEO, Greyhound Research said in an interview with YourStory.

Vodafone Idea is struggling to improve its profits because of Jio’s aggressive expansion. Vodafone Idea and the nation’s third-largest telecom operator, Airtel, are scrambling to pay India billions of dollars that they owe the government because of a decade-old case.

Amazon isn’t left out

Amazon is following its US peer – Facebook, Microsoft, and Google – in acquiring a slice of India’s burgeoning telecom market.

The e-commerce giant is in early-stage talks to buy a 5% stake worth at least $2 billion in Bharti Airtel, giving India’s third-largest telecom company a boost to compete with Jio and Vodafone Idea.

“We routinely work with all digital and OTT players and have deep engagement with them to bring their products, content and services for our wide customer base. Beyond that, there is no other activity to report.” Bharti Airtel said,

Amazon regards India as a crucial market where it has invested up to $6.5 billion to expanding its e-commerce footprint to tap a rising number of Internet and smartphone users in India 1.3 billion people.

The discussions between Amazon and Bharti emphasize the attraction of India’s digital economy for U.S. tech giants.

New expansions

Facebook’sinvestment shows India is a major new battleground for Big Tech” Amit Pau, a former VodafoneGlobal Group MD, said. “Facebook’s focused attack on Amazon in Indian e-commerce through its partnership with Jio Platforms is the firing gun of an epic showdown between the world’s biggest companies that will see Indian consumers win better services through digitization and boost the economy”.

The US tech giants have formed multiple partnerships with telecom operators in the key overseas market over the years to expand their reach in the nation. The alliance is being closely watched for the massive impact it can potentially have on India’s consumer Internet landscape.

Microsoft has a partnership with Reliance Jio to bring Office 365 to millions of small businesses at subsidized cost. Google maintains a similar partnership with Airtel for its Google Cloud suite.

Surely, Jio’s plans are enterprising, fuelled by a parent – Reliance Infocomm – whose market cap crossed Rs 10 lakh crore recently. It is also the most valued publicly listed company in India.