Facebook has enjoyed unparalleled reach in India for more than a decade. But as China’s fast-growing ByteDance emerges as a formidable competitor in what has become the world’s second largest internet market, the American social media giant has found the horse it wants to bet on in the new decade.
Facebook announced today it has invested $5.7 billion for a 9.99% stake in India’s Reliance Jio Platforms, a three-and-a-half-year-old subsidiary of India’s most valued firm, Reliance Industries and nation’s biggest telecom operator with more than 370 million subscribers.
The deal, which valued Jio at a pre-money valuation of $65.95 billion, makes Facebook the largest minority shareholder in the Indian telecom network.
The social giant said it will focus on collaborating with Jio to create “new ways for people and businesses to operate more effectively in the growing digital economy.” This is the largest investment for a minority stake by a technology company anywhere in the world and the largest foreign direct investment in the technology space in India.
David Fischer, Chief Revenue Officer at Facebook, and Ajit Mohan, VP and Managing Director of Facebook India, said one example of such collaboration could be bringing together JioMart, Jio’s small business initiative, with WhatsApp, which counts India as its biggest market with more than 400 million users.
“We can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience,” they said.
Reliance Jio, which began its commercial operation in the second half of 2016, upended the local telecom market by offering bulk of 4G data and free voice calls for six months. The telco kickstarted a price war that forced local network providers Vodafone and Airtel to revise their data plans and mobile tariffs; however, they struggled to match the offerings of Jio, which has become the top telecom operator in the country.
Reaching Jio’s users might interest Facebook, which attempted and failed to expand its free internet initiative, Free Basics, in India. (The company has since expanded Express Wi-Fi to India — though its potential and scale remains comparatively small.)
Reliance Jio also owns a suite of services (including music streaming service JioSaavn, which it plans to take public), smartphones, broadband business, on-demand live television service JioTV, and payments service JioPay.
“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,” said Mark Zuckerberg, co-founder and chief executive of Facebook, in a post.
In recent quarters, Facebook has started to take interest in local startups. Last year, the firm made an investment in social commerce Meesho; and earlier this year, it wrote a check to edtech startup Unacademy. Facebook has invested around $15 million each in these two startups.
Mohan told TechCrunch in an interview last year that the company was open to engaging with startups that are building solutions for the Indian market for more investing opportunities. “Wherever we believe there is opportunity beyond the work we do today, we are open to exploring further investment deals,” he said.
But for Facebook, there might be one more perk in this deal: Mukesh Ambani. India’s richest man is a close ally of Indian Prime Minister Narendra Modi, and his firm has consistently supported policy proposals from the ruling government. And Facebook has received more scrutiny than ever in India in recent years under Modi’s government.
In a statement, Ambani 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,” he added.
For more than a decade, the Indian market has been a duopoly between Facebook and Google. Reliance Jio has built consumer-facing services, but very few that compete directly with either of the American giants’ core offerings. But in recent years, ByteDance’s TikTok has won users that all of these companies have struggled to reach. TikTok has amassed more than 250 million users in India (as of last year), and the company says it is on track to add another 100 million this year.
Jayanth Kolla, an analyst with Convergence Catalyst, said TikTok blindsided Facebook and reached users that the American company hadn’t yet. Facebook has, predictably, attempted to build a similar service called Lasso. But it’s currently testing it in limited markets, and India is not one of them.