Alphabet-owned Google said it will invest up to $1 billion in Bharti Airtel as it looks to scale offerings of India's second largest telecom operator and build a strong digital ecosystem for consumers.

The deal, part of Google for India Digitization Fund, includes an equity investment of $700 million to acquire 1.28% stake in Airtel at ₹734 apiece and up to $300 million toward potential commercial agreements over the course of the next five years, the telecom operator said in an exchange filing.

This comes over a year after the tech giant paid ₹33,737 crore to acquire a 7.73% stake in Reliance Industries-owned Jio Platforms, India's biggest telecom operator and a rival of Airtel.

The deal will focus on enabling affordable access to smartphones across price ranges, and explore building on their existing partnerships to potentially co-create India-specific network domain use cases for 5G and other standards, the companies say in a press statement.

The partnership will also focus on shaping and growing the cloud ecosystem in India by helping accelerate the digital transformation journeys of small and medium businesses across the country, the release says.

As a part of its first commercial agreement, Airtel and Google will work together to build on Airtel’s extensive offerings that covers a range of Android-enabled devices to consumers via innovative affordability programs.

"Airtel and Google share the vision to grow India's digital dividend through innovative products. With our future ready network, digital platforms, last mile distribution and payments ecosystem, we look forward to working closely with Google to increase the depth and breadth of India's digital ecosystem," Sunil Bharti Mittal, chairman of Bharti Airtel, says in a statement.

Together, the two companies plan to bring their expertise to solve problems of affordability, access, and digital inclusion. The two firms say they will continue to explore further opportunities to bring down the barriers of owning a smartphone across a range of price points, in partnership with various device manufacturers.

"Our commercial and equity investment in Airtel is a continuation of our Google for India Digitization Fund's efforts to increase access to smartphones, enhance connectivity to support new business models, and help companies on their digital transformation journey," says Sundar Pichai, chief executive of Google and Alphabet.

In a blog post, Google says it is excited about creating new and innovative business models to help grow the Android OEM ecosystem in India.

"In the last two years, we have made steady progress on the goals we set to achieve with the Google for India Digitization fund, from building an India-focused Android experience for the country's new internet users, to partnering with companies that are deeply vested in bringing the richness of the internet to people through localized content experiences. These joint efforts will continue to be a strategic area of focus for Google as we work to make the Internet more accessible and helpful for over a billion Indians," the blog post says.

Google Airtel

Google acquires 1.28% stake in Bharti Airtel for $700 million