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Facebook buys 9.9% stake in Reliance Jio for $5.7 Billion; Our Take

So it’s confirmed: Facebook has bought 9.9% stake in Jio Platforms Limited, the parent company of Reliance Jio Infocomm Limited, for $5.7 billion (Rs 43,574 crore). This makes Facebook the largest minority shareholder in Jio Platforms, and values Jio Platforms at $65.95 billion (Rs 4.62 lakh crore, pre-money).

Reliance Industries had said last quarter, that it had invested about $21 billion (Rs 165,000 crore) in Jio Platforms Limited through Optionally Convertible Preference Shares (OCPS) and Rs 4,961 crore in equity shares. Jio Platforms Limited houses all of Reliance Industries’ digital platforms.

Facebook’s investment in Jio is the single largest investment in India for a minority stake, and to further put things into context, WhatsApp, even then a popular emerging markets messaging company, was valued at $19 billion when Facebook bought it in 2014.

The numbers

Reliance Jio Infocomm:

  • Over 388 million Internet connections in India, with over 300 million of them monthly active connections. Jio is India’s largest Internet Service Provider, accounting for more than half of its over 635 million Internet connections.
  • Subscriber ARPU of $1.67 (Rs 128.4) per month as of the quarter ending December 2019
  • Data Traffic of 1,208 crore GB in the quarter ending December 2019.
  • Average data consumption per user per month: 11.1 GB for the quarter ending December 2019.
  • Average voice consumption per user per month of 760 minutes for the quarter ending December 2019.

Facebook and WhatsApp in India

What Facebook and Jio will do together: Shopping on WhatsApp.

There’s not much clarity here, but the statement from Reliance Industries says that Jio Platforms, Reliance Retail Limited and WhatsApp have also entered into a commercial partnership agreement to push JioMart, Reliance Retail’s small business commerce platform, on WhatsApp. JioMart brings small merchants and kirana shops to the Internet – more of an omni-commerce or an “o-to-o retail” play.”

According to Facebook: “we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.” The companies “will work closely to ensure that consumers are able to access the nearest kiranas who can provide products and services to their homes by transacting seamlessly with JioMart using WhatsApp”, according to Reliance Jio.

This is particularly significant, since WhatsApp has rolled out WhatsApp Pay recently. Clearly, it is headed in the WeChat direction.

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That said, enabling commerce is unlikely to be the only reason for this investment. More on that later.

MediaNama’s Take: Why this is significant

WhatsApp doesn’t make money for Facebook, even though it is probably has the single largest daily active user base in India. It’s unlikely to enable advertising, but transactions will be a key part of its monetisation. It is probably going to go down the WeChat path, and gradually allow merchants to enable transactions through WhatsApp. Marketplaces need merchants and users, and monetize by making money through transactions. WhatsApp has users, and a payment mechanism, but immense competition.

The launch of WhatsApp Pay was delayed in India after the Reserve Bank of India imposed data localisation guidelines, and refused to allow WhatsApp Pay to go out of beta (add more than 1 million users) until they localised payments data. There was a strong push against WhatsApp pay, and its unique interface, by Paytm then. In the time that has passed, since August 2018, Google Pay, PhonePe and Paytm have emerged as the largest UPI services, with millions of transactions a month, while WhatsApp barely has any. These three platforms also have significant merchant acceptance.

Reliance Jio was always looking at a vertical integration play, with content, payments and commerce a key part of its offering to consumers, alongside connectivity. It doesn’t appear as if content and payments have worked for Jio, when compared with the likes of Google Pay, PhonePe and Paytm in payments, or with HotStar and Amazon Prime in content. Commerce is a big part of Reliance’s plans, and Mukesh Ambani made a strong pitch for ecommerce on Jio.

Both Facebook and Reliance need commerce to work for them. With this deal, they’ve chosen to co-operate rather than compete with each other, and combine forces against established players.

I wouldn’t be surprised if a large part of this funding will be deployed in on-boarding merchants for JioMart, and acquiring customers for WhatsApp pay.

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Will this partnership work? I would be surprised if it makes a dent. JioMart is not the core business for Reliance Jio. They’ll need someone entrepreneurial, and attention from the top, like they had for Reliance Jio, for JioMart to scale, and feed WhatsApp pay with transactions.

What they’re saying

Mark Zuckerberg says that the focus will be commerce:

“There’s a lot going on in the world right now, but I wanted to share an update on our work in India. 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.

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.

This is especially important right now, because small businesses are the core of every economy and they need our support. India has more than 60 million small businesses and millions of people rely on them for jobs. 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. 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.

I want to thank Mukesh Ambani and the entire Jio team for their partnership. We’re looking forward to getting started.”

Mukesh Ambani says this will enable users to digitally transact for delivery of day to day items from local shops:

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In a video statement, Ambani said that Jiomart and WhatsApp will empower nearly 3 crore Indian kirana shops to digitally transact with digital customers in their neighborhood, allowing people to order delivery of day to day items from nearby local shops. The services will also be extended to farmers, small and medium enterprises, students and teachers, healthcare providers, and women and youth.

In a written statement, he 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. All of us at Reliance are therefore humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians. The synergy between Jio and Facebook will help realise Prime Minister Shri Narendra Modi’s ‘Digital India’ Mission with its two ambitious goals —‘Ease of Living’ and ‘Ease of Doing Business’ – for every single category of Indian people without exception. 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.

(this is a developing story, and may be updated through the day today)

Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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