Rahul Sachitanand
Apr 22, 2020

Facebook buys 9.9% stake in India's Reliance Jio for $5.7 billion

Deal will give tech behemoth a chance to do-over its India plans, four years after its bruising Free Basics flop.

India accounts for the largest number of Facebook users.
India accounts for the largest number of Facebook users.

Technology giant Facebook will pay $5.7 billion for a 9.9% stake in India's largest telecom company, Reliance Jio.

The deal will give Facebook deeper access to the Indian market, from where it draws its largest number of users, as well as the chance to work with an operator that has nearly 400 million subscribers and is part of a wider business conglomerate with interests in sectors ranging from petrochemicals to retail. This is the largest investment for a minority stake by a technology company anywhere in the world and the largest foreign direct investment in India's technology sector. 

This deal will be an important lever for Facebook to build a stronger presence in India, four years after its attempts to build a free internet offering, Free Basics, was banned by the country's telecom regulator. Allying with Reliance Jio, owned by billionaire Mukesh Ambani and his family, will give Facebook not only a better reach into India's hinterland, but also better access to a stronger business lobby to promote its future endeavours. 

In under four years, Jio has built up a user base exceeding 400 million


Commenting on the deal, a Facebook statement read: "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 brought more than 388 million people online, fuelling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio." India's 60 million-plus small businesses are a key focus area for Facebook. 

Marketers will closely watch this deal since there are plenty of interested parties on both sides of the transaction. On the Reliance side, there are hundreds of millions of Jio subscribers and consumers for other businesses such as retail, while from Facebook there are many businesses and advertisers that are likely a lucrative target market. Besides building its core social media business, India is also a big market for its Whatsapp instant messaging service, where it has over 340 million subscribers and is on the cusp of launching a payment service in the country.

Concurrently, Jio Platforms (a collection of the operator's apps), Reliance Retail and WhatsApp have also entered into a commercial partnership agreement to further accelerate Reliance Retail’s new commerce business on the JioMart platform using WhatsApp and to support small businesses on WhatsApp, RIL said.

"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," Facebook's statement added. "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."

Finally, this deal will likely open a fourth front in the battle for India's consumers, online and offline, pitting the Facebook-Jio combine against Chinese apps led by Alibaba and Bytedance's TikTok, Japan’s Softbank investments and entrenched American interest from Google and Amazon.

Source:
Campaign Asia

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