Vodafone Idea: In Google's playstore?

In this battle of ecoystems, Google desperately needs a telecom company for its plans for India

Mukesh Ambani dreamt big and by attracting massive global capital, Reliance Jio has demonstrated how the power of the masses can be used to modernise and monetise, irrespective of business cycles. As Amit Shah recently articulated, the current thrust of the government in promoting Atmanirbhar Bharat too rests on the basic premise of exploiting India’s demographic advantage by providing market access to spur a consumption boom and consequently an economic recovery.

Unlike Ambani, though, no one entity in India has the resources to undertake the massive investments necessary for us to digitally transform and capitalise fully on the opportunities that the impending adoption of 5G provides at the intersection of internet of things, artificial intelligence and cloud technologies with “edge” computing. These are all disruptive technologies on a scale the world has not seen so far. Our telecom companies, Bharti and Vodafone Idea, too have the scale, reach, people and hard assets to fully exploit this. But they would need to access global capital to undertake the necessary metamorphosis to technologically adapt to the new reality of migrating from providing mere connectivity solutions to providing “platforms” for business services to the retail and enterprise customers embedded in their networks across diverse industries such as manufacturing, retail, health care and transportation.

This is where India must consider Google’s reported interest in Vodafone Idea seriously, and in totality. Google is behind both Microsoft’s Azure and Amazon’s AWS in this platform play. The third place is currently up for grabs between IBM, Oracle and Google. Google has limited presence in India, unlike Amazon and Facebook, to capitalise on this hugely lucrative, commercially important segment of a billion people with cell phones. In this battle of ecoystems, Google thus desperately needs a telecom company for its plans for India. It has had reasonable success with Telkom Kenya with its Loon project of providing connectivity to the most inaccessible regions through aerial wireless networks propelled by high altitude balloons: this can be an icing on the cake for Indian policy makers to ponder about.

Vodafone Idea is a key telecom asset, which is floundering today. The question, though, has been whether India can af­f­o­rd the conse­quences of a business failure of this magnitude. Thanks to Covid, a macro-economic reality check is on the table for our collective, misplaced arroga­nce of expecting foreign capital flows and  business growth as an angelical right wi­thout concomitant policy and environme­ntal support. Rigid judicial pronounceme­nts, frequent policy changes, regressive taxation, deliberate misinterpretations of policy intent and unending bureaucratic asphyxiation have created the current environment for business and, more so, in telecom (except Reliance for historical reasons). 

Our visionary ex-Prime Minister Vajpayee realised this in 1999 and, despite heading a minority, caretaker government, ushered in a telecom revolution by introducing sweeping changes through the New Telecom Policy, 1999. This en­compassed fundamental changes in politically contentious issues like migration to a revenue sharing model from a fixed licence fee regime, ending the duopoly ceiling in all basic and cellular circles, role of TRAI, spectrum management, etc. He chose compelling economic logic over partisan politics: the results were there for all to see as a data point of what genuine “ease of doing business” can achieve when a government is supportive of business and entrepreneurial activity.

To counter Jio, Bharti and Vodafone potentially will need to create two competitive ecosystems that have payments capabilities, rich content, retail exposure and wide distribution. For Bharti it is relatively simpler given its stronger balance sheet, operations of Bharti Retail, its large subscriber base, with potentially an alliance with Amazon providing the AWS cloud capabilities from a tech perspective, along with the rich content of Amazon prime, and a payment platform through Amazon Pay. For Vodafone Idea, however, this entire ecosystem will have to be stitched together.

Only a large strategic investor like Google can pull it off given its own interest and fear of losing out to Facebook, Microsoft and Amazon in India. While it has Google Pay and Google Fiber, it would need rich content and a retail play to combine with Vodafone Idea’s telecom infrastructure and subscriber base. Fortunately, the current environment has distressed, but quality, assets in both these areas like Zee and Future Retail. In their own interest of survival in the new emerging world a Google-led alliance among Vodafone Idea, Zee and Future Retail could be a win-win for all the three.

All this, though, would require significant governmental support in terms of policy changes and accommodation from the present restrictive regimes governing retail, ecommerce, media and telecom. That is why I referred to the statesmanship and political acumen of ex-PM Atal Bihari Vajpayee in 1999 who, despite inheriting a volatile and highly uncertain political environment, purposefully handled the gloom and pessimism in the telecom industry in a situation similar to today. The present politics, though, is immensely more favorable and risk-free for economically sensible political decision-making. Covid-19 has exposed our economy’s deepest fault lines and no amount of speeches, motivational messaging or good intent will help, unless we demonstrate statesmanship, and some clear political thinking, backed by sound economics bereft of ideological or political leanings.

Atmanirbhar Bharat will hopefully attract the investments the government has gambled on to spur economic growth without substantial fiscal expansion. But, as I have written in these columns before, whilst this may be a legitimate gamble to take, this path will clearly take a few years to reach its stated objective — if at all. Encouraging strategic alliances in telecom and technology — spurred by the small providential window provided by technological trends today — with deep-pocketed global behemoths like Google will generate benefits almost immediately. Telecom, media and technology could once again be the poster boy of a modern self-reliant India like Rajiv Gandhi and Sam Pitroda envisoned in 1984 — this time to kick-start Atmanirbhar Bharat.

After fairly limited success of many grandiose schemes and announcements since 2014, this is a divine opportunity once again — if only policymakers lend a supportive hand.

The author is a Sloan Fellow from the London Business School, director & advisor to chairmen of corporate boards, and has formerly been a group CFO in various companies