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Why Reliance Jio, Vodafone Idea, and Bharti Airtel may have Suddenly Become Irresistible to Investors

After reports of more Reliance Jio deals and Google being interested in Vodafone Idea, now Amazon apparently is in talks to buy stakes in Bharti Airtel

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Supriya Rai
New Update
Telecom Sector

The COVID-19 pandemic has brought grim news for businesses across sectors world over. Amidst all the job and revenue losses that are being reported, the silver lining has been that telecom players in India are doing comparatively well. Not only have the telcos gone above and beyond to provide people working from home uninterrupted services, but they are now also inviting investments from most of the five big American technology companies popularly known as "FAANG" (Facebook, Amazon, Apple, Netflix, and Google which is now known as Alphabet).

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After Reliance Jio recently announced a series of investments by Faceboook, Silver Lake, KKR, General Atlantic, and Vista amounting to a total aggregate investment of Rs 78,562 crore into Jio Platforms, several reports of large companies like Google, Microsoft and Amazon considering stakes in other telecom players are being reported time and again.

While last week, unconfirmed reports of Google investing into Vodafone Idea came to the fore, now Amazon apparently is eyeing a stake of two billion dollars in Sunil Bharti Mittal-owned Bharti Airtel. According to a report on Reuters, Amazon is looking to acquiring around 5 percent stake in Airtel.

“Airtel has always been a good executor of its strategies and hence is a better bet among the telcos aspiring to be the digital service providers of the country with a wider subscriber base gearing up for the 5G era. This could be a win-win situation for Airtel and a beneficial strategic investor of the stature of Amazon, who could help them further gain their market leadership with unmatchable offerings for its consumer and enterprise segments (via AWS),” said Thomas George, president, CyberMedia Research on the development.

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“A strategic Investment from any big investor will help Bharti Airtel increase its CAPEX outlay in the next couple of years, to ramp up the capacity to capitalize on revenue market share - to gain opportunities from its competition and maybe for the future 5G auction,” added Thomas.

For now, while Amazon has refused to comment on the matter, Airtel has issued a statement saying “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.” Regardless of whether these deals fall through or not, there are some possible reasons why these telecom operators may have caught the eye of investors.

India’s Friendly Foreign Direct Investment (FDI) Policy

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The Government of India has ensured a favorable policy regime and a robust business environment, which has attracted foreign capital into the country, says IBEF. The government has also relaxed FDI norms across different sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchange to name a few. Apart from these reasons, India’s rich demography, relatively lower wages, tax exemptions, and so on are added benefits for foreign companies.

Telecom Operators Offer Access to Millions of Subscribers

India’s telecommunication network is the second-largest in the world after China with over 1 billion subscribers in the country. India also has the second-largest Internet user subscriber base in the world. According to a recent report by Statista, Reliance Jio is the largest telecom operator in India with over 370 million subscribers, Vodafone Idea is the second largest with around 332.6 million subscribers, and Bharti Airtel stands third with 327.3 million subscribers. Not only are these connectivity platforms, but they also offer digital services. For instance, Bharti Airtel has Wynk and Airtel Xtream, Vodafone Idea has Vodafone Play, and Reliance Jio has JioTV, JioCinema, and several such digital services. American giants would want to invest in these growth areas and will undoubtedly benefit from the captive subscriber base in India.

It is a Win-Win Situation for All Stakeholders

The foreign investments into telecom operators could help them clear their AGR dues. While Reliance Jio has already made its full payment of Rs 195 billion by the court-ordered 23 January deadline, the government expects Rs 370 billion from Bharti Airtel and Rs 440 billion from Vodafone in terms of AGR dues. To date, Bharti Airtel has paid Rs 180 billion and Vodafone Rs 35 billion as the Department of Telecommunication’s (DOT) seeks from the Supreme Court 20 years’ time for payment of AGR dues. Also, these investments will indubitably help Reliance Industries achieve its zero-net-debt by March 2021 plan.

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