Bharti Airtel Shares Gain On $1-Billion Partnership With Google
Bharti Airtel announced a $1-billion partnership with Google to aid the nation’s digital ecosystem.
Shares of Bharti Airtel Ltd. gained the most in five months after the telecom operator announced a $1-billion (Rs 7,500 crore) partnership with Google International LLC to aid the nation’s digital ecosystem.
The search engine will acquire a 1.28% ownership in Bharti Airtel for $700 million (Rs 5,250 crore), according to an exchange filing. Another $300 million (Rs 2,250 crore) will be invested towards potential multi-year commercial agreements, including scaling the carrier’s offerings that covers a range of devices to consumers as well as accelerating access and digital inclusion.
The partnership, the filing said, will focus on enabling affordable access to smartphones across price ranges, and will continue to explore building on their existing partnerships to potentially co-create India-specific network domain use cases for 5G and other standards, and help accelerate the cloud ecosystem for businesses across the nation.
Bharti Airtel’s board has approved the issue of up to 7.12 crore equity shares of face value of Rs 5 each to Google on a preferential basis at Rs 734 apiece—a 4% premium to Thursday’s closing—aggregating to Rs 5,224.38 crore.
Reacting to this, the stock gained more than 6.6% in early trade on Friday compared with a 1.21% rise in the Nifty 50. Its trading volume was over 10 times the 30-day average volume at this time of the day. The 12-month Bloomberg consensus price target implies an upside of 16.4%.
Sundar Pichai, chief executive officer of Google and its parent Alphabet Inc, said, “Our commercial and equity investment in Airtel is a continuation of our Google for India Digitization Fund’s efforts to increase access to smartphones, enhance connectivity to support new business models, and help companies on their digital transformation journey.”
“…with our future-ready network, digital platforms, last-mile distribution, and payments ecosystem, we look forward to working closely with Google to increase the depth and breadth of India’s digital ecosystem,” Sunil Bharti Mittal, chairman at Bharti Airtel, was quoted as saying in the filing.
Gopal Vittal, managing director and CEO (India and South Asia), in an investors webinar after the board meeting, clarified that there is no conflict of interest between Bharti Airtel’s own data centre business and Google’s cloud ecosystem. “Nxtra, Airtel’s subsidiary aims to build data centres for domestic players and hyperscalers. With the Google partnership, Airtel aims to work on public cloud and the strengthening of the existing cloud ecosystem.”
“In data centres, Airtel is in a very different business relative to Google cloud,” Vittal said.
Google has also invested in Jio Platforms Ltd. The search engine has invested $4.5 billion for a 7.73% stake in the digital subsidiary of Reliance Industries Ltd. They are working on a customised Android operating system to develop low-cost, entry-level smartphones that will support Google Play and 5G.