POV: Facebook’s $5.7bn deal with Jio Platforms

Background:

Facebook has taken a 9.99% stake in Jio Platforms, the digital technology arm of Indian conglomerate Reliance Industries and owner of India’s largest mobile network operator Reliance Jio, for $5.7bn.

Details and Implications:

The deal sees Facebook take a stake in one of the fastest growing business in India. Jio Platforms was only launched four years ago but now boasts 388 million users. Beyond its mobile network, it also operates JioMart, a small business ecommerce platform and various other digital messaging, streaming and payment services.

Jio’s growth in the mobile market comes off the back of a $33 billion investment in an India-wide 4G broadband service network. Jio now holds a 32.14% share of the mobile market, with the two main rivals Vodafone Idea and Airtel both with roughly 28% each. However, these investments in Jio have reportedly left Reliance Industries carrying a lot of debt, which makes a deal with Facebook more attractive.

The main focus of the deal is to fuse JioMart with WhatsApp to: ‘enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience,’ according to the official news release from Facebook.

Facebook’s opportunity is to try and gain a further foothold in a rapidly expanding market where more than 560 million people have come online in the last five years. WhatsApp already has a reported 400 million users in India and it also has a payment service that was given regulatory approval for a phased roll out in February.

The official release from Facebook states: ‘our goal is to enable new opportunities for businesses of all sizes but especially for the more than 60 million small businesses across India’.

A recent report by Deloitte India and the Retail Association of India estimated the value of the Indian e-commerce market would reach $84bn by 2021.

Arguably Facebook’s biggest failure in its rise to global domination came in India in 2016 when its Free Basics service, which was provided via Internet.org and which gave free internet access to users in India within a walled garden, was declared to be against the principles of net neutrality because it allowed free access to only specific web sites and was therefore banned in India.

As such, there is a lot of interest, with Facebook founder Mark Zuckerberg posting on his newsfeed: ‘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. 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 Indian people and small businesses online.’

Summary:

There are around 400 million smartphone users in India (source: Statista) but with a population of 1.3 billion there is a huge amount of room for growth and massive opportunity for Facebook. The combination of the world’s most popular messaging app, an ecommerce platform with integrated payment services and India’s biggest mobile operator, all in an ecommerce market worth $84bn, will be worth watching.

Further Reading:
Facebook Newsroom | Fortune | CNN | Times of India