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6 August 2020

AWS, Google, MS, Facebook intensify Indian investment plans

Like telecoms equipment vendors, the webscalers face a double challenge – identifying growth regions as their core markets get more saturated and replicating their model effectively; while seeing some opportunities being constricted by geopolitic and recession. Of the famed BRIC (Brazil Russia India and China) economies, which were meant to deliver huge growth for ICT in the first quarter of the twenty-first century, China is increasingly closed to US providers, and Brazil and Russia are hit by economic meltdown and isolationist politics. That leaves India – certainly badly affected by the pandemic, and with its own brand of populist government, but still open for business and keen to stimulate its economy and its hi-tech ecosystem with help and money from US partners.

Against this backdrop, Facebook, Microsoft, AWS and Google have all been intensifying their efforts to secure Indian partnerships and to make investments in telcos. In June, it was reported that Microsoft was mulling a $2 billion investment in Reliance Jio, while Google was eyeing a 5% stake in market leader Vodafone Idea.

That came a few weeks after Facebook had announced its INR 435.7 billion ($5.7 billion) investment in a 9.9% stake in Jio Platforms, the subsidiary of Reliance Industries (RIL) in which Jio sits. Both of these deals could still go ahead – Google’s subsequent purchase of a 7.7% stake in Jio is not an exclusive tie-up, nor would it preclude Microsoft from joining the party.

After all, Microsoft Azure is already Jio’s primary cloud partner,  having signed a 10-year contract last year, which will see Jio building two data centers for Microsoft and moving many of its services to Azure; while the pair can offer joint packages of cloud services and connectivity, which will probably soon expand to edge computing, to customers.

These relationships between multiple webscalers and telcos seem complicated, but at this stage, the former group will be thinking more about seizing the Indian market for their own model, rather than see a local or Chinese player become dominant – how they carve things up between them can come later.

Furthermore, AWS is reportedly in talks to buy a stake of about 5% in the third Indian telco, Bharti Airtel. That would enable AWS to tap into Bharti’s customer base of 280 million subscribers and large numbers of small and medium enterprises, to push its content and cloud services and increase its share of the e-commerce market, in a country which has a large number of local, smaller-scale online retailers.

In addition, it is likely that the cloud giant wants, like Facebook, Microsoft and Google, to provide funding for the indebted telcos, in return for significant influence over their future network plans. This could be a way to drive adoption of open network platforms and distributed edge/5G architectures, of the kind the webscalers support heavily as they seek to reshape the telecoms platform, in a way that better suits their own economics and business models. (See Wireless Watch May 29 and April 24 editions for full analysis of these dynamics).

Google’s collaboration with Jio Platforms is initially heavily focused on developing affordable devices and localized applications, based on Android. Facebook has similar activities, aiming to create a multi-functional ‘super-app’, somewhat like China’s all-encompassing WeChat, with Jio.

Given the power of the Android operating system, and of Facebook’s social media and WhatsApp services, driving further uptake, and seizing control of the consumer user experience in a vast mobile-centric market like India, will be the low hanging fruit. At RIL’s annual general meeting, CEO Mukesh Ambani said Jio is targeting 500 million mobile subscribers, 1 billion smart sensor connections and 50 million homes and businesses for its 4G/5G network, by the end of 2023.

More ambitious, infrastructure-focused and enterprise-oriented cooperations will follow.

The Jio partnership, and possibly other deals with Bharti and Vodafone, could finally enable Google to make its own interpretation of the Android user experience the leading one in India. It has made successive attempts to ensure that Indian Android devices showcased the Google services and behaved in the way Google thinks optimal. In more developed economies, the attempt to define and unify the user experience (a tough job I an open source platform) has largely focused on high end devices such as Google’s own Pixel range. This has had only partial success, although a new agreement with Samsung (see separate item), will help to address fragmentation in Android, at least outside China.

But in India, the user experience is highly fragmented and the interfaces and applications are usually controlled by the operators. Google has made successive attempts to provide operators and local device makers with a simple platform to support affordable handsets and applications, in a bid to control the user experience for most Indian consumers. Android One was followed in late 2017 by Oreo Go, but neither has gained significant share compared to other platforms.

Now, the return on the investment in Jio could be focused on their agreement to co-develop an affordable 4G smartphone. Jio has had significant success with its JioPhone, a low cost 4G featurephone priced below $10, which has sold over 100 million units since it launched three years ago. But there are many more users to convert – Jio says 350m Indians still use a 2G featurephone, and one of its primary strategic objectives is to design a 4G, and later 5G, handset that will cheap enough to buy and run, that they will be able to upgrade.

Google hardly seems necessary to this effort, since Jio has done well with its own handset and already uses Android, but the search giant will bring its OS expertise and developer base to bear on the project, which will involve creating (yet another) variations of Android that will be optimized for this user base.

The investment in Jio is not just about reaching more consumers and enterprises with Android-powered Google services. It will also be designed to help accelerate the expansion of infrastructure to a larger user base, by pushing (along with Facebook) the kind of open platforms and spectrum in which Google believes.

The cooperation also fits into India’s drive to be more self-sufficient in technology, and to create an India-first 5G ecosystem (see separate item in Comment section). Currently, Chinese brands account for about 80% of India’s mobile devices market, despite the growth of some local providers like Spice.

The Jio stake is also part of a wider Google for India Digitization Fund, which aims to invest $10 billion in the next 5 to 7 years in accelerating the country’s digital economy.

Google CEO Sundar Pichai announced the fund, saying: “Getting technology into the hands of more people is a big part of our mission,” while at the same time, the cooperation with Jio and other digital partners would improve the mobile experience and services for all Indians, and for users in other emerging countries.

The fund will work through a mixture of “equity investments, partnerships, and operational, infrastructure and ecosystem investments”, according to Pichai.

Its priorities, he said, will be:

  • enabling affordable access and information for every Indian in their own language, – Hindi, Tamil, Punjabi or any other
  • building new products and services that are deeply relevant to India’s unique needs
  • empowering businesses as they continue or embark on their digital transformation
  • leveraging technology and AI for social good, in areas like health, education, and agriculture

Pichai added: “Reliance Industries, and Jio Platforms in particular, deserve a good deal of credit for India’s digital transformation. The pace and scale of digital transformation in India is hugely inspiring for us and reinforces our view that building products for India first helps us build better products for users everywhere.”

Jio also recently announced the launch of Jio Glass, a mixed reality headset that can enable audio and holographic video calls; and JioMart, an online grocery delivery service. The latter is a product of the Facebook cooperation, as it will work closely with WhatsApp “to create growth opportunities forms of Indian small merchants and enable customers to seamlessly interact with kirana shops [local grocery stores]”.