Amazon.com Inc. (AMZN) is said to be in early-stage talks to buy a stake in Indian mobile operator Bharti Airtel, in a deal valued at least $2 billion, according to a Reuters report.
If the investment deal goes through, Amazon will purchase a 5% stake based on the current market value of Bharti and it would put India’s third-largest telecoms company in a stronger position to compete against the number one player Reliance’s Jio Platforms.
“Jio has transformed itself from a pure mobile operator to a digital technology-led consumer facing platform, and Airtel can do the same,” one person with knowledge of the discussions told Reuters. “Airtel is looking to play a catch-up game here, and for Amazon it makes all the strategic directional sense for the India business.”
Amazon had reportedly been mulling several investment options, including buying a stake worth up to 8-10%.
If talks to buy a stake fall through, the companies could also look at a commercial transaction that could give Bharti’s customers cheap access to Amazon products, according to the report.
Amazon’s move comes as India’s telecom industry has in recent weeks seen a lot of interest from the world’s largest tech companies and investment funds. Indian telecommunications company Jio Platforms has raised over $10 billion from large corporates, including Silverlake, Facebook (FB), and buyout fund KKR & Co. (KKR).
Meanwhile, Alphabet Inc’s Google (GOOGL) is reportedly also mulling an investment in Vodafone Idea, a joint venture between Britain’s Vodafone Group Plc and India’s Idea Cellular.
Shares in Amazon have surged 48% since mid-March as stay-at-home orders during the coronavirus pandemic have been good for business. The internet colossus has been expanding operations during lockdown and responding to consumers’ needs, many of which switched to online retail for the first time during the global crisis. The pandemic is also creating opportunities for companies like Amazon who are weathering the crisis well and are looking to increase its reach and boost market share in other geographies.
In an upbeat report, five-star analyst Brian Nowak at Morgan Stanley this week reiterated a Buy rating on Amazon’s stock with a $2,800 price target (13% upside potential), saying that the e-commerce boost from the pandemic should be sustainable.
This year “is setting up to be an e-commerce inflection year as the combination of shelter in place, lower spend on experiences and government stimulus have driven dollars online,” Nowak wrote in a note to investors. “Trends have accelerated monthly as shoppers have moved from stocking up (March) to buying more essentials and home items (March/April) to broad-based, larger, more frequent buying (April to now).”
Overall, Wall Street analysts have a bullish outlook on Amazon. The stock scores 38 Buy ratings versus 2 Hold and 1 Sell rating adding up to a Strong Buy consensus. The $2,678.72 average price target implies 8% upside potential in the coming 12 months. (See Amazon stock analysis on TipRanks).