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Google's Airtel Deal to Bolster Its Cloud Presence in India

Zacks Equity Research

Alphabet’s GOOGL division Google is strengthening presence in the cloud market on the back of its robust portfolio.

Moreover, the company’s strong focus toward innovating offerings in the emerging cloud markets such as India is likely to drive customer momentum. This is evident from its latest partnership with Airtel, the third-largest telecommunication services company of India.

Per the deal, Airtel has now authority to offer Google Cloud’s G Suite — a suite of cloud computing, productivity and collaboration tools, software and products to its business clients.

Notably, the latest move is likely to be a major breakthrough for Google Cloud in India, which holds significant prospects.

Deal Rationale

We believe the deal under review is a win-win situation.

The combination of Google’s G Suite and Airtel’s digital business services is expected to strengthen the latter’s ICT portfolio. This, in turn, will enhance Airtel’s offerings to the small and medium-sized businesses (SMB).

Additionally, Google Cloud’s adoption rate is likely to increase in India, courtesy of Airtel’s huge customer base. Notably, this telecom company caters to 500,000 SMBs and 2,500 large businesses at present. Moreover, its subscriber base has exceeded 325 million.

We believe the latest deal bodes well for Google’s continued efforts toward expanding presence in the promising cloud space of India, which is witnessing solid demand owing to ongoing digitalization in the country.

Per a report from Nasscom, cloud market of India is expected to hit $7.1 billion by 2022. Further, spending in IaaS is likely to see a CAGR of 25% between 2018 and 2022.

Alphabet Inc. Price and Consensus

Alphabet Inc. Price and Consensus

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Gaining Competitive Edge

The latest partnership is likely to strengthen Google’s competitive position against Microsoft MSFT, Amazon AMZN and International Business Machines IBM, among others, which are also leaving no stone unturned to capitalize on prospects in the cloud space of India.

We note that Microsoft inked a 10-year partnership with Reliance Jio, the largest telecommunication company of India mid-last year. The deal has enabled Reliance to offer Azure services, Microsoft 365 and Microsoft AI platforms to its business customers. Further, the deal has expanded Azure’s reach as it introduced Azure Cognitive Services to more devices through 13 regional languages of India. Additionally, Microsoft will help Reliance in building cloud data centers in India.

Further, AWS has several Indian customers like HDFC Life, Ashok Leyland, Aditya Birla Finance, MakeMyTrip, redBus ICICI Bank, Whirlpool and L&T Infotech, to name a few. Furthermore, the e-commerce giant opened two new Edge locations in Hyderabad and New Delhi for its Amazon CloudFront and AWS Direct Connect offerings last year.

Meanwhile, IBM is also gaining traction in Indian cloud market on the back of its strong cloud services portfolio.

Nevertheless, Google’s initiatives are likely to intensify cloud competition in India. Its robust services and regions remain major positive. Google Cloud has also acquired many Indian clients like Hungama, DB Corp and PaGaLGuY, to name a few.

Currently, Google’s parent Alphabet carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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