Connect with us

Headlines of the Day

Bharti gets technology touch!, ICICI Securities

The long-awaited strategic investment fructified for Bharti Airtel (Bharti) with Google agreeing to subscribe 1.28% equity stake for US$700mn. Google will also invest US$300mn in boosting digital ecosystem in India as part of the partnership. The focus of the partnership is on i) device ecosystem by increasing affordability of smartphone, ii) network with a focus on 5G-readiness and iii) cloud infrastructure. Google will benefit from Bharti’s strong mobile subs base and >1mn SME customers. Though investment in Bharti is lower compared to Reliance Jio, the partnership will help Bharti compete against RJio’s JioPhone Next in next few quarters. Maintain BUY on Bharti with an unchanged TP of Rs861.

  • Google to buy 1.28% equity stake in Bharti. Google announced a long-term agreement with Bharti to accelerate digital ecosystem in India. It has agreed to invest up to US$1bn wherein it will invest US$700mn for 1.28% equity stake (at Rs734/sh, 3.8% premium to previous day price). Further, US$300mn will be used over the next five years toward implementing a commercial agreement, including investment in Bharti’s offering covering devices to customers and accelerating access and digital inclusion. This investment is part of Google’s vision for India Digitization Fund with corpus of US$10bn.
  • Device, network and cloud – three focus areas of partnership. 1) Under device, the effort is to increase affordability by reducing smartphone price point. The partnership will work with device OEMs and software makers to achieve the goal. Unlike RJio, Bharti will not invest in manufacturing affordable smartphones and subsidising; 2) it will work on network domain to develop use-case for 5G. Bharti is already using Google’s 5G-ready evolved packet core & SD-network platforms, and plans to explore deployment of Google’s network virtualisation solutions; and 3) partnership will focus on growing the cloud ecosystem to accelerate digital transformation journeys. Bharti serves >1mn SMEs with its enterprise connectivity offering, and this partnership will help accelerate digital adoption.
  • Huge opportunity in under-penetrated SME segment, and rise in affordable smartphone. Bharti would benefit with increased ARPU from smartphone users, and Google will help build partnership that can bring down handset cost. Bharti can come up with an alternative to JioPhone Next without heavily investing in subsidies. We see SME enterprise segment to slowly but steadily increase investment in digital ecosystem; Bharti already sells G-Suite, and now equity infusion by Google will help it aggressively push Google’s product. Bharti is also planning to expand its data centre footprint by 3x. Its new partnership will help it sell anchor tenancy to Google in upcoming data centres.

CT Bureau

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!