Google May Pick 5% Stake In Vodafone Idea As It Looks Solve AGR Crisis

As Reliance Jio continues to attract investors, rival Vodafone Idea is in talks with tech giant Google to raise fresh funds to ease debts. According to a report by Financial Times, Google may buy up to 5% stake in debt-laden Vodafone Idea.

At the same time, the report also noted that Google’s parent company Alphabet Inc may also invest in Reliance Jio. This isn’t the first time when Google is eyeing an entry in India’s telecom network segment. In 2015, Google had partnered with the ministry of railways to provide free unlimited high-speed WiFi at 400 railway stations in India. However, the project didn’t go as expected, which led to Google rolling it back in 2019.

The report has come at a time when tech giant Microsoft and Abu Dhabi state fund Mubadala Investment Company are looking to join the parade of investors in Reliance Jio Platforms with reports of a possible $2 Bn and $1 Bn investments respectively in Reliance’s digital services company.

Since April, Reliance Jio has raised over $10.3 Bn (INR 78K Cr). Of which, Facebook invested $5.7 Bn (INR 43,574 Cr) for 9.99% shares in the company, becoming the largest stakeholder of the company after Reliance Industries Limited. Facebook was followed by KKR, Vista Equity Partners, Silver Lake and General Atlantic which invested $1.5 Bn (INR 11,367 Cr), $1.5 Bn (INR 11,367 Cr), $746 Mn (INR 5,655 Cr) and $869 Mn (INR 6,600 Cr) respectively.

As of now, experts claim that the timing to this deal is a win-win for both. This infusion will help Vodafone Idea to sustain for the time being while Google will get a cheap entry in India’s telecom segment. Currently, Vodafone Idea owes around INR 54K Cr in adjusted gross revenue (AGR) dues to the government. The tech giant can also help Vodafone Idea with its technological expertise as it competes against Reliance Jio and Bharti Airtel.

In October last year, Vodafone Group’s chief executive officer Nick Read had said that the company holds 49% stake in Vodafone Idea. “We won’t increase its stake further in India as the country effectively contributed zero value to the company’s share price,” Read had said after a Supreme Court decision.

Meanwhile, experts suggest that Google’s investment in Vodafone Idea will ramp up the competition in India which is one of the largest data consumption markets. According to the data published by the Telecom Regulatory Authority of India (TRAI), India has around 115.6 Cr wireless telephone subscribers.

Currently, private players majorly Bharti Airtel, Reliance Jio and Vodafone have around 90% of the total wireless subscribers in the country. But Vodafone Idea’s share has been decreasing from the past six quarters. As of January 31, 2020, the company had a 28.4% share of the telecom market.