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Google's Loon to Aid Kenya in Providing Rural Internet

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Alphabet’s (GOOGL - Free Report) division Google has recently won a contract of connecting Kenyan rural areas through internet with the aid of its Project Loon. This is in sync with the company’s strategy to increase presence in the internet services market.

Per the latest move, Kenya will be utilizing Loon’s internet beaming balloons to provide high speed internet to the people residing in rural areas of the country. This will help the Kenyan government in addressing the needs of its rural population.

The move will also help Google in strengthening its footprint in Kenya which bodes well for its global expansion.

Connectivity Mission Gaining Traction

Google remains focused on providing high speed internet services globally. The company’s latest move augurs well for the expansion of connectivity business.

With Project Loon, the company aims to connect the world with internet by providing high speed Wi-Fi access to remote areas of the planet. Google has been successful in launching its balloons from Puerto Rico and moving them toward Peru.

Reportedly, the company’s plan to acquire Nokia’s airplane broadband business is doing the rounds. Google is trying to provide access to high speed Wi-Fi service to the flight passengers.

Further, the company teamed up with Singapore-based, StarHub, to launch Google Wi-Fi mesh router system, which provides advanced Wi-Fi connectivity at home.


Growing Focus on Developing Countries

Google’s growing presence in the emerging markets strives to address the challenges of poor connectivity prevailing in these countries. The selection of Project Loon by Kenya is a positive.

Additionally, the internet user base has grown significantly over the past few years in Kenya. Per the latest report from Internet World Stats, the internet penetration rate in Kenya came in at 85% as of Dec 31, 2017.

Consequently, Google is well poised to reap benefits from this highly internet using country.

The company also gains a competitive edge over its rival Microsoft (MSFT - Free Report) with this move. Notably, Microsoft is working with the local telecom firm, Indigo, to provide high speed broadband services to the country’s rural areas by setting up solar-powered Wi-Fi system.

Apart from Kenya, Google has reinforced its position in the internet connectivity market of India as well. The company received RailTel WiFi project in 2015 to make internet accessible at railway stations of India. The search giant completed the project by covering 400 stations.

Further, it launched Internet Saathi Programme by partnering with Tata Trusts in 2015 to bring rural women online in India. Further, the company is also trying to connect the rural India with the internet balloons of Project Loon.

All these endeavors will continue to aid the company in increasing its penetration in these developing countries. However, the populaces of these countries are yet to embrace the concept of net in easing work and are often hesitant in its use.

This does not bode well for the company’s increasing investments in these countries. Hence, we believe Google will take time to generate returns on its investments from these countries.

Further, the company’s increasing litigation issues in many parts of the world including India remains a concern and might affect its profitability in these regions.

Zacks Rank & Stocks to Consider

Currently, Alphabet carries a Zacks Ran #4 (Sell).

Some better-ranked stocks that can be considered in the broader technology sector are Match Group (MTCH - Free Report) and Facebook (FB - Free Report) . While Match Group sports a Zacks Rank #1 (Strong Buy), Facebook carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Match Group and Facebook is pegged at 12.5% and 24.4%, respectively.

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