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Updated: Google Capital Looking To Invest In Tikona: Report


TIKONA

Google Capital is apparently in talks to pick up a stake in the broadband service provider Tikona Digital Networks, reports The Economic Times, citing two persons with direct knowledge on the development. The report also mentions that Google Capital is competing with Yahoo and Microsoft for this deal.

It notes that Tikona Digital Networks’s Founder CEO & MD Prakash Bajpai has declined to comment on this deal to the publication while Google India has not responded to their queries yet. Update: Google India has sent in a boilerplate response: “As a company policy, we do not comment on rumors or speculations”.

For the uninitiated, Google Capital is a (yet-to-be-launched) fund operated by Google which focuses on late stage investments. While the mandate of this fund is not quite clear yet, a PCWorld report suggests that Google Capital will invest in areas which is adjacent to Google’s business like Internet infrastructure.

Its not clear if the fund has any plans to invest in Internet service providers (ISPs) through this fund or it will stick to Internet based companies only. The early indications seems to however lean on the latter – an AllThingsD report suggests that it has invested in at least two companies including SurveyMonkey and Lending Club, which are both Internet ventures and not ISPs.

Bizarre

What’s more bizarre is the mention of Yahoo and Microsoft also looking at this deal. While Microsoft has not responded to the publication, Yahoo India spokesperson has given a boilerplate response to the publication that they do not comment on rumors and speculations. We think it is highly unlikely that Yahoo and Microsoft will look to pick up a stake in an Internet service provider (ISP) in India.

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Tikona apparently plans to use the capital raised to roll out its 4G services in the country and to build a services framework to provide VoIP, video, IT applications and multimedia content services to its 4G subscribers. Note that Tikona currently has 4G licenses in five circles including Gujarat, Rajasthan, Uttar Pradesh-East, Uttar Pradesh-West and Himachal Pradesh and had paid Rs. 1,058 crore in the 2010 BWA auction to secure 4G licenses in these circles.

Last year, there were reports that Tikona was looking to raise Rs 1,100 crore to buy 4G network gear and had even apparently floated a request for proposals (RFP), inviting bids for 4G equipment. However, there are no further updates on this since then. The company currently has investors like Goldman Sachs, Oak Investment Partners and Everstone Capital Advisors, who own 71% in Tikona.

BWA Rollout Obligations: Keep in mind that Tikona has only about one and half years before the BWA rollout obligations kicks in. As per these obligations, all BWA licensees should provide street level coverage in at least 90% of the metro service areas and at least 50% of the rural short distance changing areas (SDCAs) by 2015 (five years of the effective date), failing which the BWA spectrum provided will be withdrawn.

Nikhil adds: I’m aware of instances in the past where executives from Google have met ISPs to understand the state of the market in India, and this has been misconstrued as an indication of interest in investing. We wonder if this is one of such cases, since the report does cite a unnamed source to say that Google Capital “wanted to understand how they can benefit by investing in 4G”.