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If the talks between Amazon and Bharti Airtel are successful, Amazon will buy a 5 percent stake in this Indian telecommunications company.
Privileged information made available by Reuters shows that Amazon.com Inc (NASDAQ: AMZN) is making a strategic move to buy a stake in Indian Telco Bharti Airtel Limited (NSE: BHARTIARTL). Bharti Airtel is looking to expand its services as it tries to catch up with its main competitor Reliance Jio.
Jio has in recent times morphed into India’s third-largest communications business through its consumer-focused service. Airtel hopes that the deal with Amazon would turbocharge its services by giving it greater market share of India’s digital economy.
The planned talks if successful would give Amazon a 5 percent stake of the market value of Bharti in a deal that is expected to be valued $2 billion.
One insider privy to the planned talks said that Bharti Airtel is eager to catch up with its competitors. It, therefore, makes tactical sense to ensure that the deal pulls through. He said the e-commerce giant is even considering buying more stakes which could be as high as 8-10 percent when the negotiations have been concluded.
The source said that the discussion is at an early stage so it would be preemptive to conclude that the parties would reach an agreement. This was corroborated by two other sources conversant with the negotiations even though they preferred confidentiality.
Amazon and Bharti Airtel to Discuss More Options
On the table are different options such as partnerships and collaborations. One of these is that Amazon and Bharti Airtel may opt for cross service understanding that would enable their customers access the services of the parties cheaply. This could ensure that Amazon services are extended to Bharti customers at reduced costs.
The spokesperson for Amazon was not willing to let the cat out of the bag when contacted by the press. She said that the company is not offering comments on the possible outcome of the talks.
A Bharti representative said that the company routinely collaborates with digital players to enable it to give its customers the best deals.
“Beyond that there is no other activity to report,” said the spokesman for Bharti Airtel.
How the Market Reacts to Talks
The market reacted to the news of the talks, with Bharti shares rising 6 percent even though it later closed at 3.8 percent.
U.S. digital giants have shown considerable interest in India’s digital economy. Jio for instance raised $10 billion from investors. One of the big investors was the social media giant Facebook Inc (NASDAQ: FB). The company has been working on diversification of its eCommerce arm just as it has in the past months advanced its cryptocurrency project.
Google LLC (NASDAQ: GOOG) (NASDAQ: GOOGL) has also shown increased interest in India. A joint venture between Google and Vodafone Group was reported last week by FT.
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