Why Google is interested in Vodafone? | Google-Vodafone deal

Analysis Aug 31, 2020

Google is in talks with Indian telecom giant Vodafone Idea for a 5% stake in the company. The valuation or the direct investment numbers haven’t been revealed yet and when asked Google and Vodafone both have declined to comment on this.

Why Vodafone-Idea need money?

In late last October, the Supreme Court of India gave it’s ruling on a decade-old adjusted gross revenues(AGR) case where the supreme court asked Vodafone to pay Rs. 28,300 crore (expected to be 53,000 crores) in dues and interests to the Indian Government. Out of the huge amount Vodafone-Idea has already paid Rs. 6,854 crores which are the principal amount, it needed to pay as of March 6, 2020.

Some respite came to the company where they got Rs. 733 crore tax relief. Also, the tariff hikes late last year has helped the company to survive so far. Vodafone India’s parent company (Vodafone Group plc) with a 45% stake has been looking for investors as they don’t want to put any more money into the business.

Sudden interest in Indian Telecom

Size of Indian Market

Currently, the total wireless market in India is close to 1.17 Billion people. Here is the share split across major players in India.

Overall this might look like a pretty even split across all three companies but the rate at which JIO is growing, it has the potential to kill the competition.

Silicon Valley interest

Silicon Valley has been eying towards the lucrative Indian telecom sector for a while. All the major players are in talks with Reliance JIO already as well with Facebook already closing a 10% stake in JIO as of April 23, 2020, with huge investments coming from Private Equity firms like KKR, General Atlantic, Vista Equity Partners and Silver Lake in the last few months.

Google was waiting for an investment in JIO but after Facebook-JIO deal, it is trying to catch up. Also, with such a huge Android base in India, they don’t want to lose that platform power by staying on the side. Google-JIO is still in talks but it seems like it might not be a huge stake from Google.

Microsoft already has a deal with JIO for Azure, Office 365 & Microsoft AI being offered through JIO’s 13 new data centers in the country. They are also thinking of investing $2 billion in JIO business to boost their presence.

Vodafone-Idea Stock Price

After the news broke out about Google Vodafone deal, the price of the stock has shot up by more than 25% in a day.

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