Indian Telecom Firm Bharti Airtel Denies Media Reports Of Amazon Buying Stake

Indian telecom firm Bharti Airtel denied media reports that U.S. e-commerce giant Amazon (AMZN) had entered into talks to purchase a 5% stake in the company for $2 billion.

In a note released to the National Stock Exchange and the Bombay Stock Exchange, Airtel said that there was “no such proposal in consideration” at this stage and it was only “speculative reporting.”

On Thursday, Reuters and other sources reported such a deal was in the works.

“We are concerned with such media reports which are published despite appropriate timely clarifications by the respective companies,” Airtel wrote.

The earlier report sent Airtel shares up by 6%. Consequently, the telecom operator wrote that such false reports lead to “unwarranted consequences and can result in reputational impact.”

An Airtel spokesperson also said that “there is no other activity to report.”

“The company routinely works with all digital and OTT [over-the-top media service] players and has deep engagement with them to bring their products, content and services for our wide customer base,” Airtel added.

The Airtel-Amazon saga mirrored a similar recent scenario involving another Indian telecom firm, Vodafone Idea, which denied reports that Alphabet (GOOGL) sought to acquire a stake of that company.

Airtel is the third-largest telecom operator in India with more than 300 million subscribers.

Despite these denials, western investors are clearly interested in India’s booming telecom market.

In April, Facebook (FB) purchased a 9.99% stake in India’s top telecom operator, Reliance Jio Platforms, a subsidiary of Reliance Industries conglomerate, for $5.7 billion. Microsoft (MSFT) is reportedly in talks to invest up to $2 billion in Reliance Jio Platforms.

Aside from Facebook, four private equity firms – KKR, Silver Lake, Vista Equity and General Atlantic – have also invested in Jio.

“Facebook’s focused attack on Amazon in Indian e-commerce through its partnership with Jio Platforms is the firing gun of an epic showdown between the world’s biggest companies that will see Indian consumers win better services through digitization and boost the economy,” said Amit Pau, a former managing director at Vodafone Global Group and now chief operating officer and partner at Accloud.

As for Amazon, it has already invested more than $6.5 billion in India – but at present it has no deal with any telecom operator in the country.

With more than 1.2 billion mobile subscribers, India is the world’s second largest telecom market, after China.

However, Indian telecom firms are struggling under low margins, hyper-competitive market conditions and ever burdensome regulatory rules. They also must spend billions of dollars to develop fifth-generation technology (5G).

Airtel itself has been struggling to add new subscribers or compete with the Reliance Jio juggernaut. Jio has attracted 300 million subscribers over the past three years, largely by undercutting its rivals.

Airtel is also saddled with more than $17 billion of debt, while Moody’s Investors Service cut its credit rating to “junk” earlier this year.

“Airtel’s profit will suffer until Jio is ready to raise prices. It is hard to say when, but Jio may remain aggressive until it achieves the No. 1 spot in mobile revenue. In the meantime, Airtel is trying to weather through by preserving [margins] at the sacrifice of subscriber loss, divesting assets to ease debt burden, and raising equity to avoid a credit downgrade," said Anthea Lai, a telecom industry analyst.

Airtel’s billionaire chairman Sunil Mittal said at the World Economic Forum in Davos, Switzerland earlier this year that conditions in India’s telecom market were “dreadful," but that this year might point to a turnaround.