Why are companies like Facebook/Amazon/Google/Microsoft buying stakes in Indian telecom players? Just a few initial thoughts.
It is essentially a distribution ploy. But all these giants are demand aggregators who already own customers (Microsoft is the only exception as it is a platform, not an aggregator). So why are buying access to customers?
They do not want access to you and me (they already have that) but to get access to the new internet customer. And no prizes for guessing which country is expected to add the highest number of NEW internet users in the next few years.
These ‘strategic investments’ into telecom players (different from M&A) are to set the ground for future ‘strategic partnerships’. Telecom players are the best point of contact for the new internet consumer. So, Facebook/Amazon/Google/Microsoft can piggyback on this first point of contact to sell their offerings (either integrate or bundle). These offerings can be for both consumers & small business (“MSMEs”).
For consumers – it could be a fight for the financial services pie (mostly payments), media/content pie & e-commerce pie.
For MSMEs – it could be a fight for the financial services pie (payments, capital aka credit) & digitization stack (cloud, suite, etc).
And now, each telecom player (through the US tech cos) has offerings for both segments.
Vodafone-Idea (now Vi) + Google
1. Gpay for consumers (& MSMEs)
2. Gsuite & Google cloud for MSMEs
Airtel + Amazon
1. Amazon Pay, Amazon Shopping, Prime Video for consumers
2. AWS, Amazon Store for Merchants for MSMEs
Jio + Facebook & Microsoft
1. Facebook, Whatsapp, Whatsapp Pay for consumers
2. Microsoft Azure cloud & Office suite for MSMEs
Microsoft in fact already had this partnership with Jio. But with the investment, it can cement this relationship
All Indian telecom players are struggling. They need the money. They won’t say no. Even Jio which was not exactly struggling needed the money to cut down its debt.
Who gets affected?
Indian startups will. These tech giants will only get more powerful with these deals. If I am sold Google Cloud and its services bundled with my data connection (Cloud will be offered as ‘free’), I might never even get a chance to try out a realtively smaller competitor like, say, Zoho.
Why are they not being stopped?
Ideally, these deals should at least be put under the scanner if not stopped. I don’t know why the regulator (TRAI) is not stepping in. Probably good lobbying?
Jio has always had this idea (of offering other services) from the beginning. It started with infrastructure (the network) and has been going downstream to applications. Creates stronger lock-ins with customers and an opportunity to increase ARPUs. On the other hand, US tech giants (the applications) are now going upstream into infrastructure through these investments in telcos.
PS: One thing I forgot to mention earlier is that these deals put net neutrality at stake. By tieing up closely with the ‘mobile data provider’, ie, the telecom, I can push my applications vs competitors’. This is why I am surprised as to why TRAI has not stepped in yet.
I published this post first as a Twitter thread here.