Facebook's $5.7bn investment in Jio for 9.99% stake makes the social media giant the largest minority shareholder in the Indian telecom sector and the biggest foreign direct investment (FDI) in India's tech space. The deal also marks the largest investment for a minority stake by a tech company in the world.
Considering China's fastest growing ByteDance evolved as a formidable competitor in 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. India's Jio Platform is biggest telecom operator in the country with more than 370 million subscribers. Jio also owns a suite of services including music streaming service "JioSaavn", smartphones, broadband, on-demand live television service "JioTV" and payments service "JioPay".
What is in the Bucket for Reliance Jio?
THE "Super App"
The entire Idea is to launch a platform i.e. a multipurpose app that would give users a place to chat, while also letting them shop for groceries from Reliance Retail stores, for clothes and apparels via ajio.com and also makes digital payments using JioMoney. The idea is along the lines of WeChat where users can converse, undertake digital payments, play games and also book flights and hotels. This would not just open humongous ways for Reliance's business in B2C space but also give company the insights about the spending trends among consumers.
Local Stores to Go Digital - The O2O Model
A Boston Consulting Group and Facebook's consumer behaviour study showed that digitally influenced purchases has gone up by 15-20% for the most big consumer goods brands who sell apparels, mobile phones and packaged goods which have had "deep" offline network traditionally.
JioMart and WhatsApp will enable 30 million neighbourhood stores (kirana) to transact digitally. Amazon, Swiggy & Zomato have also tried to get them on their platform recently but looks like it didn't work out for them. JioMart is actually an attempt under its "new commerce initiative" to launch an O2O model i.e. Online to Offline; which will connect the local grocery retailers directly with the consumers and replace the cash rich business model.
Access to Non Telecom User Base
Jio can now turn to WhatsApp to facilitate the transactions, opening up immediate access to a pool of potential customers that even its most seasoned competitors will struggle to beat. There is almost 95% market share of WhatsApp in the country, which means Jio gets access to non Jio customers which is actually almost 95% of the entire telecom network.
New Tech Initiatives by Jio
Reliance has attempted projects like a telemedicine service and even an AI powered video call assistant. And now a partner with the ability to develop competent and profitable technological innovations such as Facebook might help turn for the ambitious young carrier.
Ambani's Vision of Debt Free Reliance
At the 2019 Annual General Meeting, Ambani announced that he intended to make Reliance Industries net debt-free and it headed to the right way !!
What is in the Bucket for Facebook?
A Grip over Indian Law
It has been a big pain for Facebook to pilot its WhatsApp Pay in India because law & regulatory complexities here. The presence of Facebook representative on the board of a company whose chairman is a master of navigating India's regulatory thicket is likely to be seen also as a strong foothold in the Indian market, no matter how the law changes.
Rural Consumer Base
With over 280 million Facebook users in India and 200 million WhatsApp users, Facebook tends to monetise the ballooning number of internet and smartphones users in India at a time when the pace of growth in developed market has slowed. Facebook now with investment in Jio tends to enhance the users to another billion by lucratively robbing new users who are getting on the internet for the very first time in India's dynamic economy.
Possibility of Cryptocurrency Introduction
The multipurpose app & huge market share to the Facebook-Jio duo may result in piloting a cryptocurrency that can be unilaterally used for discounts or reward points within its telecom, entertainment and e-commerce businesses, once regulatory hurdles are cleared.
Opening Doors for $2 Trillion Market
Reliance Industries and Facebook are building an ecosystem (10 key services) each big enough to provide important and discrete services to the consumer. The core service of the platform like retail commerce, payments, content, advertising and others, together have the potential to reach beyond $2 trillion by 2025. Individually, retail and commerce is expected to touch $1.3 trillion, payments $700 billion and content, advertising and others$70 billion.
