Vodafone Idea plays down reports of investment from Google

Vodafone Idea plays down reports of investment from Google

In the past few days there has been a flurry of news reports suggesting that Google may be considering an investment in Indian operator Vodafone Idea.

If this is true, the timing is certainly interesting, coming soon after recent news that another major Indian operator, Reliance Jio, has secured more than $10 billion in investment from Facebook and a number of private equity groups.

Sources quoted by the UK’s Financial Times newspaper suggested that Google was considering buying a stake of about five per cent in Vodafone Idea. This could mean two giant internet-based companies going head-to-head in one of the biggest and fastest-growing mobile markets on earth.

Shares in Vodafone Idea rose sharply soon after the report, but the company is so far playing its cards close to its chest. Indian news media reported on Friday a company statement that there is no proposal currently before its board for a stake sale to Google. However, Vodafone Idea added that the operator constantly evaluates opportunities. 

The appeal of the market for Google and Facebook and others (including a number of Chinese companies) is obvious – sheer size. Google already offers a popular mobile payments service in India. However, the recent coronavirus lockdown has emphasised India’s continuing potential for web-based companies as end users consume more mobile data and access more online services than ever before.

A major injection of cash could hardly be better timed when Vodafone Idea is still looking at ways to pay many billions of dollars in AGR dues, not to mention ways to manage the cost of 5G spectrum purchase and rollout in the coming years, though some relief has come from recent tariff rises.

That said, it’s not clear that a five per cent stake would make much of a dent in Vodafone Idea’s massive debts. It would certainly involve much less money that the $10 billion Jio is apparently looking forward to. In addition, parent company Vodafone Group is not keen to inject more equity into the operator despite acknowledging the serious of its situation.

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