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This is why the Facebook-Reliance Jio deal is unprecedented in several ways

The deal is unparalleled in the way it will add to consumer's choices

April 22, 2020 / 03:52 PM IST
 
 
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Reliance Industries and Facebook have pulled off an unprecedented deal, especially for times when businesses around them seem to be clutching at straws to survive.

Apart from the several firsts and landmarks the $5.7 billion deal has achieved, it is also unparalleled in the impact it will have on stakeholders - from the two partners and shareholders to industry peers and most importantly, the consumers.

First, let's see how the Indian consumer, the focal point of the deal, could benefit.

Imagine a single digital platform that will probably answer each and every need of a customer. Here is a shortened list of what all one could do -

  1. Calling, messaging and sharing documents

  2. Booking tickets for movies or IPL

  3. Buying groceries, shoes, apparel or even jewellery from outlets close to your homes

  4. Creating and editing videos

  5. Playing games

  6. Making payments or transferring money

  7. Catching up on news


One could go on.

Those who run businesses can add a few more to the list:

  1. Getting loans

  2. Filing returns or GST

  3. Getting tech help for business

And many more.

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COVID-19 Vaccine

Frequently Asked Questions

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A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

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There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

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What's in it for Facebook?

India may be already the biggest market for Facebook (260 million users), WhatsApp (400 million users), and the second largest for Instagram (80 million users).

But Facebook intended to do more, especially after it was forced to shut down Free Basics in 2016.

Now it can use Jio's subscriber base of nearly 400 million users to reach out to customers, businessmen and youngsters! For instance, the moment Facebook launches its short-form video app Lasso on Jio's platform it will immediately become bigger than TikTok, the Chinese app that is immensely popular in India.

TikTok currently has about 200 million users in India.

Facebook will bank on this investment, which at $5.7 billion is the highest the American multinational has invested outside its home market, to drive its future growth in India.

By the way, it's also the highest any firm has paid for a minority stake in a technology company, anywhere in the world.

Plus-plus for RIL

In hindsight,  Chairman Mukesh Ambani had probably set the stage for the deal with Facebook, back in August 2019.

In his speech while addressing the company's 42nd Annual General Meeting on August 12, 2019, Ambani said the company had a “very clear roadmap to becoming a zero net debt company by March 31, 2021.”

The $5.7 billion investment from the American major is a significant step towards that goal. RIL is also in talks with Saudi Aramco, to sell 20 percent stake in its oil-to-chemicals division.

For Jio, the deal is a leap over its peers, including Bharti Airtel. The RIL arm will now have the opportunity to slew up several deals with Facebook that will be exclusive to Jio subscribers.

Significant takeaways for shareholders

For investors badgered by the COVID-19 crisis, the deal comes like a breath of fresh air.

RIL stock was up 8 percent in early trades, on April 22.

Its shareholders are already delighted by the benefits the deal brings. The learnings from Facebook will be significant as RIL evolves from a commodity-led company to one that deals with data, clearly the new oil.

The shareholders will be equally delighted by the prospects of Jio, and its possible IPO. The deal values Jio at Rs 4.62 lakh crore, catapulting it to the top five leagues in market cap. Jio is no longer just a telecom company, but a technology major.

A leg up for Indian economy 

Facebook's investment is a significant vote for RIL, and also a vindication of the potential that the Indian economy still holds. The $5.7 billion investment is its bet on the domestic market.

COVID-19 may have added to the sluggishness that was already there in the domestic economy, and downward revisions in GDP forecasts have further dimmed sentiments.

The deal, apart from being the first piece of good news for Indian business in a while, underlines the potential the Indian market holds, especially once the COVID-19 cloud clears.

Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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