The US social media giant has disclosed one of the most significant mergers of this decade. Facebook has made a major investment in Reliance Jio, one of the top telecom industry giants in India. Along with telecommunications; Reliance Jio is dominating the media and entertainment sectors in web & mobile marketing.
This game-changing deal will offer Facebook a 9.99% stake in Reliance Jio. The deal cost $5.7 billion. Amid the COVID19 pandemic, this collaboration could play a pivotal role in reshaping India’s small business sector. It will offer Reliance an implied amount of $57 billion.
What does Facebook say about the deal?
According to a statement made by the social media giant at its corporate website, “Today we are announcing a $5.7 billion, or INR 43,574 crores, investment in Jio Platforms Limited, part of Reliance Industries Limited, making Facebook its largest minority shareholder”.
At present, India is undergoing one of the most dynamic economic and social transformations that the world has ever witnessed. This transformation is driven by the rapid adoption of cutting-edge digital technologies. In the last five years, more than 560 million people in India have availed access to the Internet.
Why the sudden collaboration – a brief analysis
It is already known to all that Reliance Jio is a segment of the Reliance Industries. The industrial property is controlled by Mukesh Ambani, the richest person in India. Now, let us shed some light on the reason behind the collaboration.
Reliance Jio invested more than $23 billion while launching Reliance Jio three and a half years ago. In the early iteration, Jio offered extremely low-cost internet nationwide, along with providing other benefits like free SMS services and calls.
With the availability of low-cost internet service throughout the country, the existing hierarchy in telecommunications was altered. Airtel and Vodafone were no more the prime providers of telecommunications.
Imagine a scenario where the second most population of the world provided low-cost web & mobile internet service to tens of millions of people, who were never online before. This increased the traffic of Facebook. The US social media mogul now has more users from India than any other country.
Along with Facebook, the nationwide streaming services have also increased drastically. For instance, Netflix (especially after the mobile marketing membership came into play), Amazon Prime, Disney’s Hotstar, and other streaming services have increased in India. Thus, the collaboration seems pretty normal. The merger was bound to happen at some point.
What are the other stakes of Reliance Industries?
The Reliance Industries own a wide array of web & mobile media and entertainment operations. These include music streaming services like JioSaavan, on-demand television services like JioTV, JioCinema, and payment services like JioPay. These services together claim more than 388 million customers.
Apart from that Reliance Industries also own a 5% stake in Eros International, a major Bollywood movie distributor, and streaming platform. Last week it disclosed a planned merger with STX Entertainment.
WhatsApp, a subsidiary of Facebook, is now the default web & mobile messaging system for more than 340 million people across India. Also, it is one of the main news aggregation platforms. This has resulted in regulatory scrutiny. The social media mogul failed to launch the Free Basics Internet service in India.
As mentioned in a statement made by Facebook co-founder and CEO Mark Zuckerberg, “We’re making a financial investment, and more than that, we’re committing to work together on some major projects that will open up commerce opportunities for people across India”.
The merger of Facebook and Reliance Jio will help in enhancing the Digital India Mission along with two ambitious goals. One is to ensure “ease of living” and the second is to ensure “ease of doing business” for every single category of Indian people.
In a web posting, Mukesh Ambani stated, “In the post-Corona era, I am confident of India’s economic recovery and resurgence in the shortest period of time. The partnership will surely make an important contribution to this transformation.”
The Objective of Facebook-Reliance Jio Collaboration
The $5.2 billion deal is going to empower Reliance Jio’s new ecommerce platform in India, the JioMart. It aspires to connect with more than 3 crores Kirana stores through FB web & mobile messaging platform WhatsApp. Here is what exactly is going to happen.
The JioMart ecommerce platform will empower more than 3 crores small Indian Kirana shops to interact and transact digitally with every customer in the neighbourhood. The bigger plan is to enhance the grocery sector that will help individuals in availing faster delivery through Facebook’s WhatsApp web & mobile platform.
This means things will be much easier where we can all order and get faster delivery of the day-to-day articles from the local shops.
In another statement, Mukesh Ambani said, “When Reliance launched Jio in 2016; we were driven by the dream of INDIA’S DIGITAL SARVODAYA – India’s Inclusive Digital Rise to improve the quality of life of every single Indian and to propel India as the world’s leading Digital Society”.
Why is the Collaboration Beneficial for India’s Small Business Sector?
The small and medium business sector has suffered a major hit due to the COVID19 outbreak in India. The collaboration is aimed at re-establishing new opportunities for multiple businesses of all sizes, but it is specifically targeted for the 60 million small businesses across India.
According to the joint statement of both the organizations, the deal is going to strengthen Facebook’s commitment to enhancing the growth of SMBs and entrepreneurship in India. According to Ajit Mohan, the VP and Managing Director of Facebook India, the investment in startups and SMBs will be a conscious strategy.
It will be a drive to enhance the economic growth and social development of India. Last year, the social media giant invested in an ecommerce platform known as Meesho. Earlier this year, it also invested in an edtech startup called Unacademy.
In collaboration with the Jio web & mobile marketing Platforms, Facebook is looking to strengthen the complete ecosystem for small and medium businesses. The coming together of these two giants will have a deep impact on the key layers of the value chain including connectivity, ecommerce, payments, and web & mobile content.
It will help in fulfilling the vision of Digital India. There is going to be a fusion of forces. The two market leaders will come together in creating significant opportunities to understand consumer behaviour.
During the lockdown, the Kiranas, the electrical stores, multiple ecommerce platforms, and the hardware stores have been using WhatsApp for connecting with buyers.
Leveraging the power of WhatsApp and JioMart web & mobile marketing, the organizations intend to help consumers in connecting with businesses and shops to purchase, while ensuring a seamless web & mobile experience.
Reliance India Limited’s statements on the deal
Commenting on the deal, RIL stated that this is the largest investment for a minority stake by any social media mogul anywhere in the world. Also, it is the largest Foreign Direct Investment in the technology sector of India.
The investment brings Jio Platforms in the top 5 listed companies present in India according to market capitalization, within just three and a half years of its launch. The objective of the company is to enable new business opportunities.
RIL is also the most significant player in India due to a series of aggressive expansion moves that include consumer-facing businesses like grocery and ecommerce.
Since India has proved to be a critical market for Facebook in the last few years, the deal will also help Facebook in battling the emerging Chinese applications like TikTok.
Last year, Reliance stated that it will turn Jio web & mobile into a brand new digital services organization by investing almost $15 billion while attracting investors in the run-up for an eventual listing.
The Reliance-Facebook deal has come up right after Microsoft signed up a 10-year deal with Reliance last year for powering up Reliance India Limited’s data centers with Azure Cloud.
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