Microsoft may buy TikTok's India business if ban revoked: Experts

For a deal to work, they say, US firm will have to accept data localisation and keep servers in India

Microsoft, which is in talks with Beijing-based tech firm ByteDance to buy TikTok’s businesses in the US, Canada, Australia and New Zealand, has likely omitted the short-video app’s operations in India from the deal. This is despite the fact that India is the biggest market for TikTok.
 
According to industry insiders and analysts, there are several reasons for not including India in the deal. They range from the Centre’s ban on TikTok as a security measure to digital advertising opportunities being small in the country.
 
Analysts said this is far more complicated than the situation in the US. The app ban in India is also a strategic move by the Centre due to growing Chinese aggression and security threat, while at the same time focusing on promoting ‘Atmanirbhar Bharat’ and ‘Make in India’ initiatives.
 
“Keeping in mind, the nuances of the Indian ban, it could also be that Microsoft would not want to interfere at this moment in time, while the Indian government vociferously pushes for adoption of indigenous or local technology and businesses,” said Kazim Rizvi, founder of policy think-tank The Dialogue.
 
“Similarly, as the app is currently banned in India, any new buyer of the app may want to wait until the ban is lifted or if the government changes its thinking. But I do believe that it would be prudent for them to look at India which is the biggest overseas market for TikTok,” he added.
 
Besides the need to revoke the ban for Microsoft to be able to reap the full potential of the deal in India, there are going to challenges, both on the regulatory front and competition law implications.
 
“In this regard, Microsoft may have to accept full data localisation and base the TikTok India servers locally in India besides also complying with data privacy concerns,” said Salman Waris, managing partner at TechLegis Advocates and Solicitors. “Competition and antitrust law concerns could also pose a challenge,” he added.
 
“The Indian operations of TikTok will not be on any negotiation table given the ban by the government,” said a foreign policy analyst, who works with the government. “Given the importance of the Indian digital market, I am sure every potential buyer will include India in any negotiation and hope the ban is lifted,” he said.
 
Microsoft declined to share any new insights on the deal.
 
The other big reason for TikTok’s India business not being part of the deal is due to the digital advertising space being small in the country for the Redmond, Washington-based tech giant to make bets on.
 
“The US digital advertising market is more than 25 times of India and Microsoft will get more than a foot in the door with this acquisition, not to forget the sizable user base it gets in the US with this acquisition. Microsoft is looking to make inroads into the US digital ad space, something the company missed out on with its search platform Bing,” said Sanjeev Kumar, forecast analyst at Forrester Research India.
 
“Moreover, the company will be able to allay fears around data privacy more clinically in the US,” added Kumar.

Jasminder Singh Gulati, co-founder of NowFloats, which is also an investor in homegrown TikTok alternative Chingari, said India is still at a nascent stage when it comes to user-generated content in terms of governance, laws, privacy and even tolerance.
 
“Microsoft in India still doesn't relate to the end consumer as, perhaps a Google, Apple or Facebook do; either making it a potential first major investment or a stay away,” said Gulati.
 
Some analysts also said that if Microsoft’s TikTok deal in the US is successful, the company may repackage the social media platform and relaunch it in India as an American firm.
 
“If Microsoft takes over TikTok, I do believe that ‘Americanisation’ of TikTok would help calm the security and espionage concerns of the Indian establishment,” said Rizvi.
 
The overall future opportunity is huge for Microsoft, as the Indian digital market, which includes 450 million smartphone users, is expected to increase to 900 million by 2025, thanks to low data consumption costs, and a fast-growing middle class. Before India banned TikTok, the app had an estimated 200 million users and was available in 14 Indian languages in the country. It had also overtaken YouTube in India.