🔍 Why is Amazon Interested in Vi?
Amazon could be interested in acquiring a stake in the ailing telecom Vi. Here's why it is considering the move and what it could mean for Vodafone Idea.
Ever since Jio entered the telecom space, we've been seeing headline after headline charting Vodafone Idea's downfall.
The company has not only seen subscribers decline steadily, it also has a massive debt of around Rs. 2 lakh crores.
But Vi's fortunes have been changing in the last few months and a new event could further boost the company’s prospects: Amazon's investment.
🗼Amazon's Telecom Move
Yes, if rumours are to be believed Amazon is set to participate in a Rs. 20,000 crore funding round for Vi.
And it has been thinking about this deal for quite some time now.
In fact, the company had apparently conducted due diligence on Vi in 2021.
But why is Amazon interested in acquiring a stake in Vodafone Idea?
Well, a partnership with a telecom company could have massive benefits for a company like Amazon.
For starters, this could help it increase its customer base.
You see, Amazon could give Vi users free or discounted Amazon Prime memberships.
This would increase Prime customers, which would help the company bring in more and more ad revenue. Plus, these customers could also increase the company's sales.
But this is not the major reason that Amazon wants a telecom partner.
While Amazon may be more famous for its e-commerce website, the company's major breadwinner is its cloud computing service AWS.
And cloud computing services are now desperately looking for telecom partners.
Why?
Because they are now planning to make a shift to edge computing.
Huh?
What happens in cloud computing is that all the data is stored and transferred to a distant server called the cloud.
And because this cloud is ironically located under the sea usually, transferring data to it increases costs and causes lags.
So far, this has been an acceptable solution.
But now that we're relying more on faster internet, machine learning and machine to machine interactions, these lags and high costs are bad for business.
So, cloud service providers now want to provide edge computing services, where they have multiple servers that are not located far away but instead are rather close to the customers.
For this, these cloud computing providers would have to develop a significant amount of infrastructure in various countries.
But they decided to take the smart way out: piggyback on telecom infrastructure which is already widespread.
That's where Amazon's interest in Vi stems from.
The telecom has two big data centres worth $1 billion in India (though some believe they are overpriced), 70 small data centres and a 1.6 lakh km fibre optic network.
And all of this infrastructure will not just help Amazon in its edge computing.
You see, Amazon is also planning on launching its own satellite network, Project Kuiper, soon.
This will be kind of like Elon Musk's Starlink with satellites providing internet connectivity.
For this too, it needs telecom infrastructure and spectrum in various countries. Setting up from scratch would involve complying with too many regulations which would be costly and time-consuming.
So, it is partnering up and investing in different telecoms in different countries.
🤔 Why Not Partner with a Stronger Telecom Player?
Like Reliance (which has a 3.25 lakh km fibre optic network) or Airtel (2.5 lakh km fibre network)?
Well, Amazon had been interested in Airtel, but Google snapped it up, meanwhile, Jio was taken up by Facebook.
So, Vi and Amazon now only have each other to fall back on.
And even though Vi's fortunes have been improving after the company decided to give the government a majority stake instead of paying interest on its adjusted gross revenue dues, it still is bleeding customers.
Also, Amazon has its own concerns. You see, edge computing is an up and coming technology. Entering this space ahead of time could be a huge disadvantage.
Given the scale and magnitude of the technology that Amazon is envisioning, the may not happen anytime soon. And this could be a huge problem for Vi as it needs cash right now to bid in the upcoming 5G spectrum auctions. If it can't get its hands on the appropriate spectrum bands, it might just be game over for the network.
However, if a deal does take place it will be interesting to watch Amazon and Reliance compete once again in a new battleground.
⚡In a line: Amazon is trying to acquire a stake in Vi to get access to its telecom infrastructure for its future plans.
💡Quick question: Do you think the Amazon-Vi deal will be successful?
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