Facebook To Invest In Reliance Jio To Redefine The Market Equations in India?

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Facebook To Invest In Reliance Jio To Redefine The Market Equations in India?

Since the launch of Reliance Jio in the year 2016, Reliance Industries, owned by Mukesh Ambani, the...

Since the launch of Reliance Jio in the year 2016, Reliance Industries, owned by Mukesh Ambani, the richest man in India, has been dubbed as the only Indian-origin conglomerate that could give US tech groups a run for their money in the fast growth-oriented Indian market. The incredible success of Reliance Jio has caught the attention of social media behemoth Facebook who now wants a part of it.

Facebook is reportedly looking forward to acquiring a stake worth 10% in Reliance Jio. The move will enable the social media giant to further strengthen its digital presence via the subscriber base of Jio in India which is way bigger than the entire population of the whole US, standing at over a whopping 370 million users.

It should also be noted that this isn’t Facebook’s first attempt to penetrate India. The social media behemoth already made its debut attempt back in 2013 when Mark Zuckerberg came to seek partnership with Mukesh’s brother Anil Ambani, who incidentally declared bankruptcy for his telecom venture earlier this year.

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Zuckerberg came with the grandiose proposal of free internet and a 10-page plan called Internet.org and Free Basics for India, which later received a massive backlash from the entire country which sought ‘net neutrality’. Thus, that was the end of what could have been the first Ambani-Zuckerberg tie-up.

The failure of the first potential Ambani-Zuckerberg didn’t discourage Facebook from investing in India. The company acquired Little Eye Labs in 2014 which was a startup working on a software tool to analyse the performance of apps on Android phones and was based out of Bengaluru. Another Indian startup Meesho which is an e-commerce company that connects customers with resellers by leveraging social media received funding from Facebook last year. In February 2020, Facebook once again made its move by making its third investment in the home-grown ed-tech startup Unacademy.

However, compared to the humongous scale and potential of the current proposed deal, none of Facebook’s earlier investments come close as the Reliance Jio which is a unit of Reliance Industries is one of the biggest conglomerates of our country and is owned by Mukesh Ambani who recently lost the title of Asia’s richest man to Jack Ma of Alibaba.

According to a report by the Financial Times, the proposed deal between the social media giant Facebook and India’s Reliance Jio is already being valued in “multi-billion dollars”. It has also been reported that Facebook was supposedly very close to signing the preliminary deal however the sudden growth in the momentum of the Covid-19 stalled its progress.

Analysts at financial services firm Bernstein valued the homegrown Reliance Jio – launched in 2016 and is only three and a half years old company – worth $60 billion. Therefore, Facebook would make an investment of approximately ₹45,000 crores or $6 billion if they buy a 10% stake into Reliance Jio. At present, the whole Reliance Industries’ current market capitalisation is ₹6.5 lakh crore of which Reliance Jio is a part of.

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It’s not the Facebook alone which got its eyes set on Jio. Apart from Facebook, it has also been reported that tech giant Google has been involved in talks Jio too. However, the details of the matter are still unknown.

Facebook Buys Jio Stake: The Impact

In less than three years since its inception, Jio has already achieved the goal of providing internet access to the majority of the population of India just by lowering down the cost of data to an incredibly inexpensive range which the poor could afford as well. This was one of the primary goals that the first failed Zuckerberg and younger Ambani tie-up sought out to achieve.

In fiscal Q3 2020, Jio posted a record-high standalone revenue of Rs 13,968 crore from its operations, with a net profit of Rs 1,350 crore. It took Jio only a little over three years to acquire nearly 35% of the total subscribers in India. Therefore, it can well be said that the whole landscape of the telecom industry was changed as a whole by Jio. They started by offering free data and voice services to its users for six months after which they continued their offerings for absolutely throwaway prices.

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