When Covid-19 has brought to a halt almost all deal activity across the world, the $5.7 billion equity deal between Reliance’s Jio Platforms and tech giant Facebook has sent shockwaves through India’s e-commerce and telecom industry. The deal, which gives Mark Zuckerberg’s Facebook a 9.99 per cent stake in Mukesh Ambani-led Jio Platforms, was announced Wednesday and is likely to face the scrutiny of fair trade regulator Competition Commission of India and telecom watchdog Trai.
The largest FDI in India’s tech space by the Menlo Park, California-based social media behemoth makes Reliance chairman Mukesh Ambani the richest man in Asia, surpassing Alibaba co-founder Jack Ma.
The teaming up of Reliance Retail, Reliance Jio and WhatsApp has left competitors like the Alibaba-backed Big Basket, Amazon’s Pantry and Walmart-owned Flipkart shaking in their boots. Just a day after the deal was announced, Amazon ramped up its pilot programme Local Shops on Amazon, anticipating that it won’t be the only one trying to woo small businesses across India into its digital systems.
It’s clear that this deal isn’t just big, it’s serious and has the potential to have industry-wide implications, both in e-commerce and telecom. At the national level, it seems to peddle Prime Minister Narendra Modi’s Digital India Mission.
The agreement has also raised eyebrows on privacy concerns as a consequence of two “data elephants” coming together.
And this is why Reliance Jio and its deal with the world’s largest social media platform is ThePrint’s Newsmaker of the Week.
What’s in it for Ambani?
Well, the tie-up seems to be a clear win-win for both sides. Jio’s parent company Reliance Industries gets some breathing space amid its ballooning debt and a flailing petroleum business (courtesy declining crude oil prices).
The deal gives Jio a whopping pre-enterprise value of ₹4.62 trillion, also making it the fifth-largest firm in India. Daddy Reliance is on that list too, mind you.
But making big splashes has always been Jio’s way. After entering the telecom sector in 2016, it went from being a new kid on the block to bulldozer in just three years. Offering cheap data plans to its 370 million subscribers, the company has been accused of predatory pricing and “monopolistic tendencies” by rival Bharti Airtel and upturning the entire telecom industry. It’s also courted controversy for using PM Modi’s face in an ad in 2016.
What’s in it for Zuckerberg
Mark Zuckerberg finally gets a slice of India’s internet pie that he’s been eyeing for more than five years now, and that too, without wasting much time on obtaining regulatory approvals.
Also, the timing couldn’t be more impeccable. As Facebook India CEO Ajit Mohan put it, announcing the deal amid the coronavirus crisis “is a reflection of our commitment to invest in the country.”
The deal will give Facebook a board seat in Jio Platforms and “an observer seat without voting powers” in addition to using WhatsApp for e-commerce opportunities with small businesses in India.
Let’s not forget that Zuckerberg has been pining to provide internet access to India’s one billion strong consumer market for some time now.
In 2014, the American entrepreneur visited a Rajasthan village to launch the ‘Free Basics’ plan to “provide free internet access to a digitally starved nation”, but its business proposal was shot down by Trai in 2016. Trai had said that the model proposed by Facebook violated principles of net neutrality. Zuckerberg gave it another shot in 2017, with the launch of Express WiFi in non-urban areas but that now seems to have gone cold turkey.
This time around, he has partnered with one of the most influential and successful businessmen in the country who may have just given him the golden ticket he’s been waiting for.
Views are personal.