Why Facebook picked Reliance Jio for alliance in India

Reliance is the only Indian firm to compete with global peers and the social media giant knows it well.

April 28, 2020 / 03:16 PM IST

When two of the world’s best meet, its reverberations can be felt throughout the planet. Facebook’s announcement earlier this week that it had invested Rs 43,574 crore for a 9.99 percent stake in Reliance Jio Platforms, the stakes had been raised to the highest level with one single shot.

The collaboration is by no means surprising. Mukesh Ambani's Reliance has emerged as the only Indian company capable of competing with US tech groups in the fast-growing domestic market. They range from mobile telecoms and home broadband to ecommerce.

This deal makes Facebook, the social media giant, the largest minority shareholder in the Indian telecom network. It also marks the largest investment for a minority stake by a tech company in the world, and the biggest foreign direct investment (FDI) in India’s tech space.

Beginning in 2016, Jio has transformed India’s technology market by offering free calls and cheap 4G internet service -- its mobile internet service alone has attracted nearly 400 million users in 42 months. Widely welcomed by users hamstrung by slow 3G connections and high tariffs, Jio’s appearance on the scene has virtually annihilated well-set competition, including Airtel and Vodafone.

India has been going through a rapid digital transformation over the last few years and it would be accurate to say that Jio has contributed a sizable chunk to this change. Since it has played a big role in bringing millions of Indians and small businesses online, Facebook, with this investment, will have closer access to Jio users.

Close

For the US firm, the potential through this collaboration is breathtaking in its sweep. India is home to 400 million WhatsApp users – Facebook’s global messaging app – and 300 million Facebook users. So the popular global social networking website is now working on collaborations in one of its biggest markets with one of the largest telecom service companies, which is driving the same market. As far as alliances go, this one is surely made in heaven.

Think big, act big

Thinking and acting big helps. That Reliance has left local competition far behind to compete with its global peers, is to state the obvious. The Jio-Facebook deal comes after Microsoft last year announced plans to partner with Jio to offer cloud computing to businesses.

India has emerged as a critical market for Facebook and its WhatsApp messaging platform. 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.

Facebook overall is now estimated to have more users in India than any other country. India overtook the US last year to become the world’s second-largest smartphone market after China by unit shipments, according to Counterpoint Research, making it a high priority for Silicon Valley companies as well as an eyeful for their rivals in China, much maligned now in the aftermath of Covid-19. This could well mark the beginning of similar alliances for global tech companies seeking partnerships in India, wanting to thumb their noses at China.

A tempting proposal

That Reliance has made the Indian market tempting for Silicon Valley companies is even more commendable, given that the government has added restrictions to overseas businesses, like its proposed Personal Data Protection Bill.

In a joint interview, after the deal was inked, Chief Revenue Officer at Facebook, David Fischer and Managing Director of Facebook India, Ajit Mohan, said that a potential collaboration would be JioMart. For years, WhatsApp has worked to build tools for small businesses and taken an avid interest in payment systems. Facebook too has chased similar objectives. By bringing together JioMart, which is Jio’s small business initiative with WhatsApp, Facebook plans to connect people with businesses, shops and purchase products, giving them a chance to discover new products. Such thinking reveals an innovative mindset and a creativity that the Indian businesses – caught up in the rigmarole of the day today - could well do with.

With Jio, one of the fastest-growing companies in the world, that justifiably has ambitions to take on Amazon in e-commerce, provide fiber net, run data centres and set up new services like telehealth and distance learning, the investment from Facebook will help.

Facebook too stands to gain substantially with this deal. Mukesh Ambani is a prominent voice in India, whose views on business and other matters carry substantial weight. It can certainly help the American social networking site to leave a bigger imprimatur in India.

Ultimately, the Jio-Facebook deal will accelerate India’s push for ‘Digital India’. Amid the COVID-19 pandemic and the economic slump, this may come with a two-fold advantage for this country – driving the digital transformation and regulating the economy. With JioMart and WhatsApp, Mukesh Ambani, in his video message said it would be possible for around 30 million neighbourhood stores to transact digitally. It certainly suggests a transformational shift in the way business is conducted in India.

For Facebook, it is a tempting thought to gain a huge base of users because of the rise of China’s TikTok, which has amassed more than 250 million users in India. With Facebook’s attempt to build a similar service called Lasso with Jio in their corner, the metamorphosis would be well and truly complete.

Ranjit Bhushan is an independent journalist and former Nehru Fellow at Jamia Millia University. In a career spanning more than three decades, he has worked with Outlook, The Times of India, The Indian Express, the Press Trust of India, Associated Press, Financial Chronicle, and DNA.

Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Ranjit Bhushan
first published: Apr 28, 2020 12:24 pm

stay updated

Get Daily News on your Browser
Sections