Facebook-Jio Deal: How Is It Going to Shake Up The Indian Market?

Facebook has reportedly bought the stake in Reliance Jio for Rs 43,574 crores.

Facebook has bought a minority stake in Relaince Jio.

(Photo: The Quint/ Erum Gour)

Video Editor: Puneet Bhatia

Yes, it’s official. Facebook has bought a 9.99 percent stake in Reliance Jio for $5.7 billion (Rs 43,574 crore), which makes it the largest investment for a minority stake by a tech company anywhere in the world.

But what does it mean for both companies? How is this partnership going to help Indians and more importantly what does it mean to users? Let’s dive into this.

How Does Reliance Jio Benefit?

The first order of business for Jio is to see off some of the debt it has. According to a Livemint report, Jio will use Rs 28,000 crore of the Rs 43,000 crore it has received from Facebook to redeem optionally convertible preference shares. Currently, Jio’s debt stands at Rs 40,000 crore.

“In the very near future JioMart, Jio’s digital new commerce platform and WhatsApp will empower nearly three crore small Indian kirana shops to digitally transact with every customer in their neighborhood. This means all of you can order and get faster delivery of day-to-day items from nearby local shops”

Mukesh Ambani, Chairman & MD, Reliance Jio

A lot of emphasis on this deal lies in the collaborating of Facebook’s messaging platform WhatsApp and Jio’s e-commerce venture JioMart. Jio’s Managing Director Mukesh Ambani also said that the partnership will help smaller businesses and ‘kirana’ stores.

Facebook as a diverse and extensive communication platform can help with that last mile connectivity Jio is striving for.

Also, Facebook which owns Oculus can lend its expertise on Jio AR and Mixed Reality division which Jio showcased last year.

Jio TV and Jio Cinema are some of the more popular apps in Jio’s suite. With Facebook’s backing, Jio will have bragging rights to some of the exclusive content that it was having trouble getting till now. Jio’s music division JioSaavan could be integrated with Facebook to rival competitors like Gaana.

To top it all, Jio could benefit from the advertising prowess of Facebook which is only second to Google right now.

How Does Facebook Benefit?

Facebook has been known to capture the interest of users but not necessarily win them over. It had tried its Free Basics model in India back in 2015 but was shown the door by the government.

This partnership is a new opportunity for Facebook to embed itself deeply into the core communications ecosystem which Reliance Jio dominates with its subscriber base.

This could also be a window for WhatsApp Pay to make a comeback as it can partner with Jio Money to start a payments platform that has a wider reach compared to where WhatsApp pay is now.

Facebook is investing heavily in small businesses and India being a hub for SMBs works perfectly into the social network's plans. It can leverage the diverse communications network division to Jio to reach out to these businesses and help them come online to expand their current portfolio.

How Does It Benefit Users?

The deal could also bring to fruition the idea of a power app that combines all of Jio’s and Facebook’s services into one. This means a one-stop-shop for everything.

This deal also means that Facebook could have access to data that Jio has been able to garner thanks to its smartphone subscriber base. We know that Facebook doesn’t have a good history with user data.

“As we have seen in the past, the data-sharing agreements and privacy is an elephant in the room. You have to look into the consumer data from a very serious angle. That information is somehow lost in the fine print but I am sure someone will look into that.” 

Tarun Pathak, Associate Director - Devices and Ecosystems at Counterpoint Research

This deal is big for both companies. As of now, this move could be seen as a threat for the likes of Google, TikTok, telecom companies, and every major competitor that Jio and Facebook have been waging wars against till now.