The Reliance Jio - Facebook Deal


Facebook’s stake purchase in Reliance Jio, a tech subsidiary of Reliance Industries Limited (RIL), has been one of the greatest news last year. The announcement by Facebook sent the share prices soaring. It highlighted the potential in Indian e-com and attracted the interest of various foreign investors. It has contributed to about 25% of the total inbound investment in India in 2020 and is now the largest investment in the Indian telecom sector. The total investment was worth 5.7 billion dollars; Facebook is now the largest minority stakeholder in Reliance Jio with a 9.99% share.


What does it mean for Reliance?


Since its launch in 2016, Reliance Jio has been one of the largest players in technology in terms of market share and revenue. In India, there are more than 338 million users connected to the internet through Jio. It was the first telecom service to provide free calls and unlimited internet services for 7 months to gain market share. In fact, a price war started as Jio provided its services at a nominal value and forced many companies out of business. However, the diversification into the telecom sector also resulted in heavy debts for Reliance Industries. The recent funding through Facebook helped them cover their debts and attain their ‘zero net debt’ goal. The Jio platform extends beyond telecom services to Jio health, Jio cinema, and Jio chat where it failed to monetize; joining hands with WhatsApp, the most commonly used communication service provider in India, and the Jio Mart initiative can also pose challenges to large e-commerce services like Amazon and Flipkart.


What does it mean for Facebook?


"This investment underscores our commitment to India and our excitement for the dramatic transformation that Jio has spurred in the country," said Facebook CEO Mark Zuckerberg. India has always been a large market for Facebook with millions of people using its messaging service (WhatsApp) and many availing its core social media networking. Despite this, Facebook has not been able to monetize it to its full potential. To capture the market, Facebook has, in the past, tried providing free internet services in India through a program called Free Basics. However, it was banned in 2016. Facebook’s investment in Jio will therefore help it navigate further through the Indian market.


Moreover, the “data sovereignty” movement requires India to keep a check on all global companies collecting data. Various Indian businessmen have argued that the Indian data is a national resource and should be used for the benefit of the Indian government and businesses only. “Data is the new oil [in the new world order], and data is the new wealth. India’s data must be controlled and owned by Indian people – and not by corporates, especially global corporations. Today, we have to collectively launch a new movement against data colonisations,” said Mukesh Ambani in 2019. The movement poses a threat to global tech and e-commerce companies. Companies like Google are facing antitrust investigations and Facebook had trouble getting approval for WhatsApp Pay. Investments by companies like Google and Facebook into Indian corporations, therefore, has a strategic advantage for these tech giants that will never find mention in their press releases. Having a representative on the board of a large company like Reliance can ease the way for global tech companies to get past India’s regulatory framework which would otherwise be unchartered territory for them.


Impacting small business


Both Facebook and Reliance industry acknowledge the importance of small businesses in the economy. To promote small businesses, Facebook introduced payment systems and facilitated entrepreneurs to sell goods and services through their digital storefront. In the wake of coronavirus, most businesses are moving from physical to digital. The Jio Mart initiative has been a huge relief to many such retailers and is enabling them to establish a digital presence. Therefore, this partnership has eased the way in digitizing India.



References:


https://www.indiatoday.in/technology/features/story/facebook-invests-5-7-billion-in-jio-takes-10-percent-share-5-key-points-to-know-1669633-2020-04-22


https://www.nytimes.com/2020/04/21/technology/facebook-jio-india.html#:~:text=SAN%20FRANCISCO%20%E2%80%94%20Facebook%20on%20Tuesday,forging%20ahead%20in%20the%20pandemic.&text=Facebook%20said%20the%20move%20indicated%20its%20commitment%20to%20India.


https://scroll.in/article/967618/explainer-why-google-and-facebook-are-investing-in-mukesh-ambanis-reliance-jio


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