Facebook's collaboration with Jio is meant to create new ways for people and businesses to operate more effectively in the growing digital economy.
After enjoying over a decade of its presence in India, Facebook announced that it has invested $5.7 billion in Mukesh Ambani’s Reliance Jio. The telco, which is a subsidiary of India’s largest industrial house Reliance Industries, has more than 370 million subscribers.
The multibillion-dollar deal will make Facebook the largest minority shareholder in Jio Platforms Limited, giving the social media giant a firm foothold in a fast-growing massive market, and helps the Indian the oil-to-telecom conglomerate to significantly cut debt.
An official statement from Facebook said, it will focus on collaborating with Jio to create “new ways for people and businesses to operate more effectively in the growing digital economy.”
Reliance said last year that it would turn Jio into a new digital services company by investing nearly $15 billion, potentially attracting investors in the run-up to an eventual listing. The Jio-Facebook comes after Microsoft signed a 10-year deal with Reliance in 2019 to power the Indian company’s data centers with its Azure cloud.
In March this year, the duo was reportedly in a partnership discussion to develop a new super app in India. The new application will allow users to do the shopping and make payments, similar to WeChat. It is also expected that the upcoming app will allow users to play games, according to a report published on Economic Times. The report also pointed out that the discussions have been delayed due to coronavirus pandemic.
Since Jio’s launch in 2016, it has rapidly grown to become India’s largest telecom company, accumulating over 370 million customers through a flurry of innovations, including offering cut-throat mobile internet prices and a range of products and including chat services, movies, games and music.
The deal will help reduce RIL’s debt burden, which bulged due to the breakneck expansion of Jio and other businesses. Ambani invested around $40 billion to launch Jio in 2016. RIL also became the largest retail player in India that has made a series of aggressive expansions into consumer-facing businesses such as e-commerce and grocery.
According to a report in Moneycontrol.com, “RIL has in recent months accelerated efforts to reduce debt by attempting to sell stakes worth billions of dollars in some of its businesses. It is in talks with Saudi Aramco to sell 20 percent of its oil to chemicals business and Canadian private equity firm Brookfield Asset Management for a stake in its telecom tower business.”
Meanwhile, India has emerged as a vital market for Facebook and its WhatsApp messaging platform, which has 400m users in the country. The number of internet users in India is expected to rise to about 850 million in 2022, according to consultancy PwC, up from 450 million in 2017. Its WhatsApp platform is about to launch a key payments service will take on incumbents Paytm, Google Pay, PhonePe and Amazon Pay.
Despite the rapid growth of its social network and WhatsApp, Facebook faced a tough time with its Free Basics plan to provide free internet services after a ban telecom regulator TRAI. It now has an established ally with an established rural network on its side that is present in sectors ranging from telecom to ecommerce to home internet. The deal will also help Facebook battle rapidly growing Chinese apps like Tiktok which has attracted a section of the Indian population, mostly the millennials. It can also counter other US giants like Google, Amazon and China’s Alibaba with this move.
“This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country. In less than four years, Jio has fueled the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio,” Facebook said in a statement, adding that its goal is to enable new opportunities for businesses of all sizes, but especially for the more than 60 million small businesses across India.
Facebook believes, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, it can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.