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Facebook-Jio deal; what’s in there for Facebook?

Facebook Inc. to invest $5.7 billion, or Rs. 43,574 crore in Jio Platforms, the digital and telecom assets controlled by Mukesh Ambani. The investment will make Facebook the largest minority shareholder in Jio Platforms Limited(JPL).

Jio Platforms was created as a subsidiary of Reliance Industries Limited in late 2019 for its digital initiatives with an initial infusion of ₹1.73-lakh crore.
JPL has a number of brands under it including the telecommunication arm Reliance Jio, and other technology-based initiatives in education, healthcare and agriculture services.

“This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country,” Facebook said in a blog post.

Facebook is looking to leverage JioMart, and Jio’s small business initiative combined with WhatsApp to connect people to businesses and shops. WhatsApp now has over 400 million active users in India. The move is timely as Facebook as recently the National Payments Corporation of India (NPCI) granted permission to operate WhatsApp Pay.

Not only Facebook will benefit from Jio Platforms but also will be able to influence the Modi-led government to support its initiatives. RIL chief Mukesh Ambani is a close ally of PM Narendra Modi and has been supporting the government policies. The Indian government banned Facebook’s Free Basics service as part of a ruling that supports net neutrality.

Facebook has enjoyed unparalleled reach in India for more than a decade, with more than 300 million active users in the country. But as recently China’s TikTok has emerged as a threat to the social media conglomerate, acquiring JPL was the best bet from the company.

Once the deal agreement is signed, it will become the largest foreign direct investment (FDI) in the country for a minority stake. The Ambani-led Jio has grown massively to more than 370 million subscribers in just over three years of its launch in 2016. Thanks to its free and cheap calls and data services, Jio disrupted the telecom industry in the country and forced many networks to either shut down their services or get merged with others.

In a video message, Ambani said, “At the core of our partnership is the commitment that Mark Zuckerberg and I share for the all-around digital transformation of India and for serving all Indians. Together, our two companies will accelerate India’s digital economy to empower you, enable you, and to enrich you.”

Of the total investment, Rs 15,000 crore will be retained by Jio Platforms, while the remaining will be used by the company to redeem the optionally convertible preference shares held by RIL in the digital business.

As the Mark Zuckerberg-led company picks up 9.99% stake in JPL, it is now valued at Rs. 4.6 lakh crore. This will catapult JPL as the fifth largest firm, considering market capitalisation of listed companies in India, behind its parent Reliance Industries (RIL), TCS, HDFC Bank and Hindustan Unilever (HUL). While RIL and TCS m-cap stands at 10 lakh crore and 8 lakh crore respectively, HDFC and HUL are close to the 5 lakh crore mark.

Recently Facebook has started investing in Indian startups. Last year it put $25 million in social commerce startup Meesho, and earlier this year it invested in Edtech startup Unacademy along with Sequoia and General Atlantic.

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