In a deal that has been under media highlight for quite some time, Facebook announced today, an investment of $5.7 Billion in India’s largest telecom company by subscriber base, Reliance Jio. Jio is owned by Reliance Industries, the $150 billion+ business conglomerate owned by Asia’s richest man, Mukesh Ambani.
Facebook said, “This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country. In less than four years, Jio has brought more than 388 million people online, fueling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio.”
According to a statement issued by Jio, Facebook will now own 9.99% of Jio, valuing the telecom company at a staggering $65.95 Billion pre money valuation (using a conversion rate of INR70=1USD). The deal would make Facebook, the largest minority shareholder in Jio and would make Jio India’s most valued telecom company by a big margin. This is the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India, Jio said in a statement. The investment values Jio Platforms amongst the top 5 listed companies in India by market capitalization, within just three and a half years of launch.
Facebook says that it would use the power of Whatsapp with that of Jio’s ecommerce arm JioMart to enable India’s small businesses get online. There have already been speculations of a WeChat like ‘super app’ that is under development that would enable small businesses do everything from messaging to payments to ecommerce. This deal could see the development and release of such an app. In a statement issued by Reliance Industries Chairman Mukesh Amabani, he says, “The combined power of Jio’s world-class connectivity platform and Facebook’s intimate relationship with Indians will offer innovative new solutions to each one of you”.
“Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector, in addition to empowering people seeking various digital services.” , Jio added.
Whatsapp has over 400 million users in India, which is approximately 80% of India’s smartphone user base. Jio on the other hand, has over 388 million subscribers across the country. The investment holds high significance for both companies.
For Facebook as a whole, it would mean possibilities of a much needed increase in per user revenue numbers from India. Despite India being one of its largest user bases globally, the country’s contribution to Facebook revenue is minimal. Combining with Jio, Facebook gets direct access to small businesses for the first time, which could lead to potential increase in its revenues.
For Jio-parent Reliance Industries, this will come in as a windfall gain on their 3 year old telecom venture. The money would also provide significant capital to Reliance for off-loading its debt. Ambani had recently announced to make Reliance debt-free, and this money would probably go that way.