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Why Amazon is gunning for a telecom partner in India

India, as one of the world’s fastest growing economies and with one of the world’s fastest growths in data consumption, is critical to the plans of all major cloud players – whether Microsoft, Meta or Google. (Photo: Reuters)Premium
India, as one of the world’s fastest growing economies and with one of the world’s fastest growths in data consumption, is critical to the plans of all major cloud players – whether Microsoft, Meta or Google. (Photo: Reuters)

  • Big tech players are beating a path to telcos’ door because India--unlike most other nations with operational 5G which have allowed non-telecom entities to own 5G spectrum and operate 5G networks--has made telcos the sole operators of 5G networks. This means that anybody wanting to use 5G networks has to go through a telco

The Vodafone Idea board’s “clarification" on a story broken in this paper that online retail and web services giant Amazon may invest up to 20,000 crore in debt and equity in struggling telco Vodafone Idea needs to be parsed carefully. The clarification states that the board is “currently" not considering any such proposal. It did not say it will not consider such an offer in the future, or had considered such a proposal in the past which may or may not be awaiting certain other developments to happen before it fructifies.

The ’other developments’ of course, is the conversion of VI’s back dues to the government into equity. As part of its relief package to struggling telcos, the government had offered to convert its dues of 16,133 crore into equity, which the VI board had cleared in January.

That deal, which would also make the Indian government the single largest shareholder in India’s third largest telecom operator by subscriber base, is expected to happen shortly. It's only then, as VI’s managing director Ravinder Takkar admitted in an interview last week, that the company’s planned 20,000 crore fund-raising plan can go through.

VI of course, desperately needs the cash to bid for 5G spectrum in the upcoming auctions. Without the funds that Amazon – or any other potential investor -- brings in, it will be unable to bid for spectrum, And without 5G spectrum, it may as well say goodbye to any long-term prospects of staying on in the market.

Strangely enough, the same alpha-numeric combination also explains why Amazon, whose core businesses lie in e-commerce and cloud computing services, should be looking at investing in a telecom operator. And no, it is not for backward integration with its logistics operations, although that will come in handy, as Amazon increasingly automates its warehousing and logistics operations using robots and drone technology using the Internet of Things (IoT), for which 5G networks are critical.

Amazon, like all cloud services providers, is eyeing terrestrial networks to seamlessly link its cloud services with its enterprise clients. In fact, Amazon Kuiper – its ambitious plan to offer satellite-based broadband through a network of low earth orbit satellites – has just inked a deal with global telecom giant Verizon to use the Kuiper system for 5G backhaul.

India, as one of the world’s fastest growing economies and with one of the world’s fastest growths in data consumption, is critical to the plans of all major cloud players – whether Microsoft, Meta or Google. And significantly, both Meta and Microsoft have made major investments in Jio Platforms, while Google plans to follow up its over 33,000 crore investment in Jio with up to $1 billion in Airtel.

The reason that big tech players are beating a path to telcos’ door is that India -- unlike most other nations with operational 5G which have allowed non-telecom entities to own 5G spectrum and operate 5G networks -- has made telcos the sole operators of 5G networks. This means that anybody wanting to use 5G networks has to go through a telco.

Of course, this is a big business opportunity for telcos to earn revenue. But simply offering commoditized 5G network services will only get you so much and so far. Deep integration with deep tech companies offers the opportunity to unlock the value offered by 5G.

And in India, with rivals Reliance, Facebook and Google already linked up with telcos, Amazon only has VI as an option – other than the unlikely prospect of partnering with the ailing government-owned BSNL – if it wants to join the party.

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