Facebook’s $5.7 billion investment in Reliance Jio analysed

22 April, 2020 | newsx bureau

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Facebook has recently announced $5.7 billion investment in Mukesh Ambani’s Reliance Jio for 9.99% stake to bring JioMart to users via WhatsApp. Let’s look at why this deal is a win-win for both par...

Facebook has announced a monumental $5.7 billion investment in Mukesh Ambani’s Reliance Jio for a 9.99% stake. This makes it the biggest external investment in Reliance Industries, with the exception of the pending Saudi Aramco deal, and the biggest FDI in India’s tech sector. There is more to this than a cash infusion into Jio as both the companies have stated this is more of a strategic partnership. Already, both parties are coming together to propel the Jio Mart platform to bring over 60 million small scale retailers online using WhatsApp. This is just the tip of the iceberg. Let’s look at why this deal is a win-win for both parties.

  • Jio has a mounting debt issue which it wants to be rid of by 2021. The problem is compounded by the COVID19 pandemic which has hit Reliance’s core business of petrochemicals hard. This $5.7 billion investment helps Reliance get rid of that debt quickly.
  • Facebook had a mounting urgency to monetise WhatsApp which it had purchased for $21.8 billion in 2014. In recent years it launched stories and WhatsApp for business but it is not close to recouping this investment. WhatsApp Pay has also been delayed in India because it didn’t adhere to the RBI’s data localisation laws, even though it has been granted permission to launch in a phased manner. This deal with Jio, especially, the integration with Jio Mart supercharges Facebook’s monetisation drive. There will be more levers in the future.
  • Facebook has always wanted to be embedded in the fabric of India’s Internet. Free Basics was shrugged off by TRAI in 2015. Since then, express WiFi hasn’t seen many takers. Facebook’s partnership with Jio makes sure that it not only has a partner in India’s largest telecom operator in a market which is now consolidated.
  • Reliance Jio with over 300 million subscribers is massive by any measure. But Facebook is bigger in India with more than 300 million users for the main website, 400 million users on WhatsApp and around 80 million users on Instagram. However, it is facing a threat in the form of TikTok which has quickly amassed 250 million users in India. Using Jio it can penetrate in rural India faster and counter TikTok.
  • Reliance’s JioPhone’s are also quite popular and a great entry point for Facebook’s suite of apps for users in rural India. Facebook could also enhance Reliance’s pedestrian hardware with some of its services. That may be a long shot considering the capabilities of the Google backed KaiOS platform which powers these phones — but it could happen.
  • For Reliance Jio, its credentials of being a technology company are shaky at best with few users for its phones, IoT products, augmented reality and AI based solutions. Jio Money could take-off if it is integrated in Instagram, Facebook and WhatsApp, it’s augmented reality products could also be integrated with Facebook and Instagram while also learning a thing or two from Facebook-owned Oculus.
  • Content is going to be a huge play for both Facebook and Jio. Both have massive leverage in this space. Facebook owns the rights to ICC tournament highlights, apart from streaming rights for the Spanish La Liga which is also popular in India. Jio TV is highly popular. Jio Cinema is also quite big in India. Interestingly, in 2017 both Jio and Facebook independently bid for the rights of the Indian Premier League (IPL) only to lose out to Disney-owned Star. Ironically, Facebook’s India boss, and VP Ajit Mohan was at Disney when this deal was done leading their online streaming service Hotstar. Chances are Jio and Facebook will combine forces in 2022 and bid for IPL rights.

Facebook Jio

Facebook x Jio Super App? 

Apart from all of this there is also chatter about Facebook and Reliance coming together to make a super app that would rival what WeChat has achieved in China. A super app is a one stop shop which can do everything from communications, payments, e-commerce, social media, to gaming. Paytm is the closest to being a super app in India. Even though many e-wallets are moving in that direction, Paytm and Google Pay are closest to achieving that ubiquity.

If one combines the strengths of Reliance and Facebook, the raw material to make a super app that would possibly be superior to Paytm is there for everyone to see. Additionally, the Jio Mart integration with WhatsApp already reeks of a super app.

A super app would also help Reliance take on Amazon and Flipkart in the e-commerce space considering it can integrate its brick and mortar Reliance Retail and ajio.com online assets alongside having messaging, social networking, AI, gaming, payments running all together on top of its Jio 4G network. It is also worth noting that Jio is the only telecom operator in India which is also relatively 5G ready.