Telecom buzzes again

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The Indian telecom sector is witnessing a flush of foreign investments at a time when all other sectors are reeling under the debilitating impact of the coronavirus pandemic. All the three leading private telecom players — Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea Limited (VIL) — have begun receiving sudden interest from American tech giants and private equity investors. While Facebook has announced that it will pick up 9.9% stake in Jio, Amazon and Google are keen to invest in Airtel and VIL. While the unprecedented investor interest in Jio is explained partly by its infrastructure and e-commerce potential, similar reasons could be behind the world’s largest retailer, Amazon, eyeing a toehold in Bharti. Amazon views India as a key market; it has already committed upwards of $6 billion investments in the country and appears aggressive in cornering a larger share of the hugely underpenetrated e-commerce market. A flurry of media reports spoke about Amazon being in talks with Bharti Airtel to buy a 5% stake worth at least $2 billion and Google looking to buy up to 5% stake in VIL even as Google’s parent Alphabet Inc may be looking to buy some stake in Jio Platforms. These developments make it clear that India’s telecom sector is back in business after going through a painful churning and an existential crisis over the contentious issue of the adjusted gross revenue (AGR) dues to be paid to the telecom department.

The buzz in the telecom sector when investment activities stand suspended throughout the world can be attributed to two important factors: the sudden rise in demand for round-the-clock connectivity as Covid-19 has made ‘Work From Home’ (WFH) a new mantra and the consequent push this pandemic has provided to the fledgling e-commerce and e-payments markets in India. The surge in WFH demand has re-energised telecom networks. The pandemic has triggered fundamental changes in areas like WFH, e-commerce and e-payments. The sudden growth potential in these sectors is driving large investor interest. The investment by Facebook in Jio is more strategic and was made with the specific intent of getting access to Jio’s e-commerce muscle power, especially across small kirana stores. In any case, Jio Platforms is the market leader in both wireless and broadband services in the country, with nearly 388 million subscribers and 43% AGR market share besides nearly 60% share in data traffic. The e-commerce market is expected to more than double in five years and offers perhaps the largest growth potential anywhere in the world for Amazon, which is set to partner with Bharti. Not long ago, India’s telecom market had more than a dozen big players but has since shrunk to just three players.


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