Analysis: Facebook invests $5.7 billion in Jio for a 9.99% stake, here’s what it means


Facebook has announced that it has invested $5.7 billion in India’s Reliance Jio which is the country’s largest telecom operator which has more than 388 million users. Facebook will be holding a 9.99% stake, with the company valued at $65.95 billion with the rupee valued at 70 for a dollar. This is the largest independent investment in Reliance Industries which is owned and managed by India’s richest man Mukesh Ambani. It is also the largest FDI in the Indian tech sector. As a part of the deal, Reliance’s Jio Mart platform will work in tandem with Facebook-owned WhatsApp to bring over 60 million small scale retailers and Kirana vendors online. 

This is indicative of a broader partnership which could involve merging of a multitude of services that make a huge part of Jio platform that includes a payments service, streaming service, IoT, cloud computing, augmented reality and communications platform all underpinned by the scale of the Reliance group in India and its telecom network. Facebook’s services are hugely popular in India – the combination of WhatsApp, Messenger, Facebook and Instagram could be mobilised to work in concert with the Jio platform. 

There is a lot of overlap between the two but there is a clear synergy in this partnership as Facebook’s strength in digital services, AI and augmented reality could play well with Jio’s scale and ubiquity in India. 

What does this mean for Facebook

  • For Facebook, winning India is existential since China isn’t an option. It tried to penetrate India in 2015 with Free Basics but was shown the door by the government and regulators. Then it launched express WiFi which was connecting 500 retailers across 10,000 hotspots, but there has been radio silence on its success which could mean that endeavour has been a flop. So this is a new way for it to become deeply embedded in India. 
  • Facebook has been having trouble launching its WhatsApp Pay platform in India, this could either mean Facebook is merging that initiative with Jio Money. So far, WhatsApp pay is in limited launch in India. One way or the other, it will be able to monetise WhatsApp something it has been unable to do so.
  • Facebook will likely be deeply integrated on devices that Jio sells on its own. Jio sells its 4G connected feature phone – the JioPhone 2 for Rs 2,999 in India. Even though it has partnered with Facebook before, for this platform, there could be further synergies especially as it tries to break into rural India. Jio’s new broadband network could also fuel these ambitions further. 
  • Facebook has 300 million users in India while WhatsApp has more than 400 million users. Instagram is said to have around 80.5 million users in India. Combined Facebook is close to commanding a billion users in India but it has its hands full as Chinese rivals like TikTok have surged in India in the last couple of years. This partnership will help fend-off any competition. 
  • Facebook’s blockchain-based cryptocurrency platform Libra has faced resistance in the US. The Indian government has also been opposed towards cryptocurrencies – having Reliance by its side also opens multiple regulatory hurdles for the Menlo park-based company.

Why this is important for Reliance Jio

  • With a valuation of $65.95 billion, Jio would want to go debt-free by 2021. This investment by Facebook would help Jio achieve that. This is doubly important as the core Reliance Industries business of petrochemicals has been hit badly by the COVID19 pandemic. Jio has to be highly lucrative for Mukesh Ambani, fast. 
  • While Jio is talked of in terms of a platform integrating software, hardware, services on top of a sprawling state of the art telecom infrastructure, the reality is different. Its software and hardware have found few takers. Apart from the initial success of the JioPhone, the hardware initiative has been a dud. Facebook could revitalise services like Jio Money if deeply integrated into Facebook’s platform. Similarly, Facebook also owns Oculus which could help Jio’s AR and Mixed Reality initiatives. Jio hardware could also benefit from deep integration with Facebook’s services. 
  • Jio TV and Jio Cinema are perhaps the only services in the Jio suite that has captured the attention of Indian users. Apart from being one of the first live TV streaming services, it also owns rights to a couple of cricket tournaments which is the most popular sport in the country. Facebook and Jio actually bid for the rights for the IPL in 2017, but instead, Disney-owned Star won the rights. When the lucrative tournament is up for bidding again in 2022, you can trust a unified effort which would be hard to beat. 
  • Reliance plans on taking JioSaavn, its music streaming service public. It could get better integrated with the social network giving it leverage over local players like while this investment also opens a smoother path for the JioSaavn to go public next year.
  • Reliance could also benefit from Facebook’s advertising platform which is the most lucrative one on the planet outside of Google. A number of Jio’s services could benefit from the finesse of Facebook’s technology know-how and advertising tech. 
  • Jio Mart is a joint venture between Jio and Reliance Retail and its mission is to become India’s biggest e-commerce player. That’s a tall task considering it is up against Jeff Bezos’s fueled Amazon with almost unlimited funds and Walmart owned Flipkart which also has deep pockets. Facebook’s $5.7 billion is no chump change in this battle.

Is there a super app in the works?

Since the rumours of this potential partnership were announced, there have been rumours flooding the grapevine that Jio and Facebook could be working on a super app which would take on the likes of the Alibaba backed Paytm in India. Super apps like WeChat have already become ubiquitous in China and many expect India could be the next frontier for them with the digitisation of the economy. This COVID19 pandemic is proving to be a catalyst for accelerating this trend as people don’t want to use cash with the fear of being infected by the highly contagious virus. 

Already the Facebook and Reliance press releases indicate this with the news of Jio Mart being mobilised on WhatsApp to bring 60 million small scale business online. 

But a proper super app would go beyond this –

  • It would leverage not just small scale retailers but would bring Reliance’s Retail stores and online store into play allowing it to better compete with the likes of Amazon and Walmart owned Flipkart. They are already doing this with this Jio Mart deal. But this would also counter anything Alibaba and Paytm could do or all the gains Google is making in this space with Google Pay.
  • It will likely use a combination of Jio Money and WhatsApp Pay (if it gets regulatory approval) while also doubling as a communications platform that WhatsApp is in a ubiquitous way.
  • This super-app could also leverage BookMyShow which is owned by Reliance for selling tickets, the content could come from a combination of Jio TV+Cinema and whatever Facebook does coupled with news media offerings that are part of Jio News and Network 18.
  • It would be data mining gold mine for both. Mukesh Ambani famously said in 2016, “data is the new oil” which is being proven by this pandemic. Facebook is known for its data harvesting capabilities – using this app they could team up and a better handle on engagement for B2C businesses and consumer spending habits which could dictate the next business they get into.