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Here's why Facebook bought stake in Reliance Jio for Rs 43,574 crore

Here's why Facebook bought stake in Reliance Jio for Rs 43,574 crore

Here's why Facebook bought stake in Reliance Jio for Rs 43,574 crore
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By Moneycontrol News Apr 22, 2020 9:08:52 AM IST (Published)

This is not the first time Facebook has bought a stake in a company in India. Facebook owns minority stake in Meesho -- a social commerce company and Unacademy -- an online education startup.

Facebook has bought a 9.9 percent stake in Reliance Jio for USD 5.7 billion (Rs 43,574 crore), the telecom unit of Reliance Industries Ltd (RIL) in a deal that gives the social media giant a firm foothold in a fast-growing massive market and helps the Indian oil-to-telecom conglomerate to significantly cut debt.

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This gives the social media giant a firm foothold in a fast-growing massive market and helps the Indian the oil-to-telecom conglomerate to significantly cut debt.
The company said, "This investment underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country."
Here's what Facebook will gain with this stake buy in Reliance Jio:
Facebook has now become Reliance Jio's largest minority shareholder.
With Jio's 388 million customers, Facebook gets access to a wider audience.
Will help in creating opportunities for 60 million small businesses across India.
To help people and businesses operate more effectively in growing digital economy.
For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience, Facebook said.
Our efforts with Jio will be focused on opening new doors and fueling India’s economic growth and the prosperity of its people, it said.
This is not the first time Facebook has bought a stake in a company in India. Facebook owns minority stake in Meesho -- a social commerce company and Unacademy -- an online education startup.
Since its launch three years ago, Jio, led by billionaire Mukesh Ambani, has grown at a sprinter’s pace to become India’s largest telecom company. It has accumulated some 340 million customers through a barrage of innovations, including offering cut-throat mobile internet prices.
The deal will help reduce RIL’s debt burden of, which bulged due to the breakneck expansion of Jio and other businesses. Ambani invested around USD 40 billion to launch Jio in 2016. RIL is also the largest retail player in India thanks to a series of aggressive expansionary moves into consumer-facing businesses such as ecommerce and grocery.
The Facebook deal is now the centrepiece of the ambitions of India’s biggest private company to cut net debt to zero by March 2021.
RIL has in recent months accelerated efforts to reduce debt by attempting to sell stakes worth billions of dollars in some of its businesses. It is in talks with Saudi Aramco to sell 20 percent of its oil to chemicals business and Canadian private equity firm Brookfield Asset Management for a stake in its tower business.
For Facebook, India has in recent years emerged as a critical market. The company has more users in India than any other country. Its WhatsApp chat service, which is about to launch a payments service, has attracted 340 million users.
Despite the rapid growth of its social network and WhatsApp, Facebook stumbled with its Free Basics plan to provide free internet services after a ban by Trai, the telecom regulator. It now has an established ally on its side that is present in sectors ranging from telecom to ecommerce to home internet.
A recent report by Cisco said India is poised to have more than 900 million internet users due to the increased penetration of affordable smartphones and cheaper internet plans. India will also have around 2.1 billion internet-connected devices by 2023, said the report.
Last year, Reliance said last year that it would turn Jio into a new digital services company by investing nearly USD 15 billion, potentially attracting investors in the run-up to an eventual listing. The Jio-Facebook comes after Microsoft signed a 10-year deal with Reliance in 2019 to power the Indian company’s data centers with its Azure cloud.
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