Google explores 5% stake in Vodafone Idea

In what could alter the Indian telecom scenario, Google is reportedly exploring to buy a 5% stake in financially-stressed Vodafone Idea, a move that would not only pit Sundar Pichai-led tech giant against Facebook which has poured in ₹43,574 crore for 9.99% stake in Reliance-led Jio Platforms but also help struggling Vodafone stand up in the world's fastest growing mobile market.

According to a report in the Financial Times on Thursday, people familiar with the matter said Google is exploring an investment in Vodafone's struggling India business.

"One of the people said Google was considering buying a stake of about 5% in Vodafone Idea, a partnership between the UK telecom company and India's Aditya Birla Group that has been under severe financial strain. Another said the process was at a very early stage," the report claimed.

Both Google and Vodafone did not comment on the report.

According to the report, Google's parent company Alphabet was also in the race to acquire a slice of Jio Platforms but lagged behind.

"Pursuing Vodafone Idea instead would potentially pit Google against Facebook and an increasingly dominant Jio but the company could also make multiple investments in India," the FT report mentioned.

According to Prabhu Ram, Head-Industry Intelligence Group, CMR, Google is interested in buying a 5% stake in Vodafone Idea to give impetus to its India push.

"India is the fastest growing mobile-first nation, with significant digital transformation at its core. Also, the move may be to take on the Facebook-backed Jio behemoth," Ram said in a statement.

Late last month, the Supreme Court gave partial relief to Vodafone Idea by allowing for a tax refund of ₹733 crore to the telecom operator. Vodafone Idea had sought a refund of ₹4,700 crore.

The company has over ₹53,000 crore in Adjusted Gross Revenue (AGR)-related dues, according to an estimate by the Department of Telecommunications (DoT).

In a big relief for telecom operators, the DoT in March moved the Supreme Court seeking its approval for a 20-year window for payment of around ₹1.47 lakh crore AGR dues, as adverse functioning of the telecom firms could have a negative impact on the economy and consumers across the country.

In a regulatory filing, Vodafone Idea earlier paid a sum of ₹2,500 crore on February 17, 2020 and a further sum of ₹1,000 crore on February 20 towards the AGR liability.

"The company has paid a further amount of ₹3,354 crore to the DoT, being the balance part of the principal amount towards AGR liability. Thus the company has paid the full principal amount of ₹6,854 crore towards the AGR dues," it had said.

According to Vodafone Idea's own assessment, its AGR dues stand at ₹21,533 crore and the principal amount out of the total dues is ₹6,854 crore. However, according to the DoT's estimate, the company's overall dues stand at ₹53,000 crore.

On the other hand, the behemoth Jio Platforms has an equity value of ₹4.91 lakh crore and an enterprise value of ₹5.16 lakh crore.

Over the last month, leading technology investors such as Facebook, Silver Lake, Vista, General Atlantic and KKR have announced aggregate investments of ₹78,562 crore into Jio Platforms.