FB Goes Big on Jio

In the backdrop of markets and industries working on thin line due to Coronavirus lockdown, tech giant Facebook invested $5.7 billion in Mukesh Ambani’s telecom company Jio. This deal has the potential to make Jio a digital mammoth that caters to all the needs of its user through a single digital platform.
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Crux of the Matter

The Great Indian Deal
Facebook bought a 9.9% stake in Mukesh Ambani’s telecom company Reliance Jio. This investment of $5.7 billion (₹43,574 crores) values Jio at $65.95 billion (₹4.62 lakh crores). This places Jio amongst the top 5 listed companies in terms of market capitalization in only 3.5 years of commercial launch. This deal is also the largest investment by a tech company for buying a minority stake in another company. It is also the largest FDI in India’s tech sector.

What’s in for the consumer?
The deal turns Jio from a telecom company to a digital giant. A single digital platform that can do the following can come out of the joint effort of FB and JIO:
Calling, messaging
Ecommerce
Ticket bookings
Creating, editing videos
News
Loan applications
Filing tax returns
Money transfer and much more

One focus of our collaboration with Jio will be creating new ways for people and businesses to operate more effectively in the growing digital economy. For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.

Facebook

What’s in it for Facebook?
Facebook has a huge market in India. It has:
a) Facebook users: 260 mn users – highest in the world
b) WhatsApp users: 400 mn users – highest in the world
c) Instagram users: 80 mn users – second highest in the world


Facebook is eyeing India’s huge market which is growing at a fast rate. It is looking to benefit from the 400 mn user base of Jio entrenched till the last Indian. In 2016, TRAI shut down Facebook’s Free Basics plan of providing internet. Facebook’s WhatsApp payment service will soon be launched in India and is expected to compete with Google Pay, PayTM, PhonePay, Amazon Pay, etc. The tech giant is likely to drive unprecedented growth through the Indian market.

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What’s in it for Jio?
Mukesh Ambani announced to make Reliance debt-free by March 2021 and this deal could help in deleveraging India’s one of the largest conglomerates Reliance Industries. It had ₹1.5 lakh crores of debt as on the financial year ending March 2019. RIL already in talks with Saudi Aramco to sell a 20% stake of the oil-to-chemical division of RIL. Ambani is also in talks with Canadian private equity firm Brookfield Asset Management for selling a stake of telecom towers. In 2019, Jio joined hands with Microsoft for the development of data centers in India with the help of the Azure cloud.

All of us at Reliance are humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians.

Mukesh Ambani, Chairman, RIL
Curiopedia
  • Facebook bought Whatsapp in 2014 for a staggering $19.6 billion deal. This has been one of the biggest silicon valley deals ever. This acquisition was 10 times the acquisition of Instagram by Facebook.
  • The Facebook–Cambridge Analytica data scandal was a major scandal in early 2018 where Cambridge Analytica harvested the personal data of millions of people’s Facebook profiles without their consent and used it for political advertising. It has been described as a watershed moment in the public understanding of personal data and precipitated a 17% fall in Facebook’s share price.
  • Soon after the broadband wireless auction (BWA), in June 2010, RIL bought a 96% stake in Infotel Broadband – promoted by Anant Nahata – that had won 22 circles in the BWA. They started to work as a telecom subsidiary of Reliance, and later in January 2013, they were named Reliance Jio Infocomm Limited. Hence, initially, Jio was called IBSL (Infotel Broadband Services Limited).
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