Facebook Acquires Minority Stake In Reliance Jio, India’s Largest Mobile Phone Operator

Facebook (FB) said it will invest $5.7 billion in Indian mobile internet company Reliance Jio, a subsidiary of conglomerate Reliance Industries, which is owned by Mukesh Ambani, the wealthiest man in the country.

In exchange, Facebook receives a 9.99% stake in Jio, the largest mobile network operator in India with some 370 million users as of year-end 2019.

"This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country," Facebook said in a statement.

Reliance Jio stated: "This partnership will accelerate India's all-round development, fulfilling the needs of Indian people and the Indian economy."

The deal deepens Facebook’s footprint on the huge subcontinent market, where its WhatsApp chat service already has 400 million users – reaching almost 80% of smartphone users in India.

"At the core of this partnership is a commitment Mark Zuckerberg and I share for the digital transformation of India," Ambani said.

Facebook also indicated that it seeks a collaboration between WhatsApp and Reliance's e-commerce entity JioMart to allow people to purchase products digitally from businesses and shops.

"Facebook is teaming up with Jio Platforms -- 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," Facebook CEO Marl Zuckerberg wrote on his own Facebook page. "India is home to the largest communities on Facebook and WhatsApp, and a lot of talented entrepreneurs. The country is in the middle of a major digital transformation and organizations like Jio have played a big part in getting hundreds of millions of Indians, [and] small businesses online.”

Zuckerberg noted that India has more than 60 million small businesses. “With communities around the world in lockdown, many of these entrepreneurs need digital tools they can rely on to find and communicate with customers and grow their businesses,” he said. “This is something we can help with -- and that’s why we’re partnering with Jio to help people and businesses in India create new opportunities.”

Nikhil Inamdar, BBC India business reporter, commented that Reliance Jio is the “most valued subsidiary” of Reliance Industries and has been able to “upend India's telecoms market… by offering very low data prices, which has allowed it to keep competition at bay.”

The transaction is also a key part of Ambani’s plan to cut Reliance Industries’ net debt to zero by March 2021. At year-end 2019, Reliance's liabilities amounted to $65 billion, up from $19 billion in 2015.

“India is seen as a key market for the growth of both Facebook and its WhatsApp messaging platform,” Inamdar wrote, adding that the number of internet users in India will climb to about 850 million in 2022.

Ironically, the Facebook-Jio deal emerged as the Indian government is making it more difficult for foreign tech firms to gain a foothold in India through more restrictive ownership rules.

The Wall Street Journal reported that almost three-quarters of Facebook’s revenue is generated in North America and Europe – meaning India presents an extraordinary growth opportunity. (Facebook and WhatsApp are banned in China)

“Partnering with Reliance could help Facebook navigate India’s formidable regulatory landscape better,” the Journal wrote. “Ultimately, Jio may be hoping to create something akin to WeChat in China -- a ‘super app’ that includes everything from chat and payments to news and e-commerce. The carrier is already bundling many of its apps with its wireless services and a tie-up with Facebook could extend the strategy.”