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A New Collaboration to Accelerate India’s Digital Transformation: Jio-Facebook Deal.

Reliance Industries and Facebook recently announced that the social media giant will acquire a 9.99 per cent stake in Jio Platforms, a unit of RIL, for $5.7 billion (Rs 43,574 crore). The investment mark a rare coming together of two giants who have a reputation for market domination. As per the deal, Facebook will get a board seat and an observer seat on Jio Platforms. Although the deal is a binding agreement, it will need approval from antitrust watchdog Competition Commission of India.

SOURCE: Sirchend

BENEFITS TO FACEBOOK

  • The deal marks Facebook’s entry among elite investors in India’s technology space, joining the likes of SoftBank, Amazon and Google that have together poured in billions of dollars in Indian tech start ups and their own ventures over the years.
  • The transaction gives Facebook an opportunity to deepen its presence in India, which is its largest market in terms of users, where Jio has changed the telecom industry with cheaper data plans.
  • It also gives Facebook access to Jio’s bouquet of digital apps. These include in-house apps such as Jio Money, Jio TV, etc, in addition to the young start ups acquired by Reliance or its subsidiaries across categories such as logistics, e-commerce and artificial intelligence.
  • The partnership with Reliance could also help Facebook navigate the regulatory environment in India, where it has faced several issues with the authorities, including for its major initiatives such as WhatsApp Pay and digital currency Libra.
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BENEFITS TO RELIANCE INDUSTRIES LIMITED

  • Back in August 2019, RIL had said that the group had prepared a roadmap for becoming a zero net-debt company within 18 months. The Facebook deal significantly contributes to that plan by cutting down about Rs 43,574 crore from its outstanding debt as of Rs 2.92 lakh crore.
  • WhatsApp has around 400 million users in India and using WhatsApp’s base allows Reliance to promote its services to users of Jio’s rival telecom players.
  • For Jio, this could mean users staying within its products for most of their online time, and thus emerging as a destination and not just the medium.No other service provider has really been able to do that so far though all have tried.
  • The transaction value also helps with valuation in case Jio wants to go for an IPO in the future.
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Facebook has been trying for years to get a share in the Indian internet market. In 2015, it had experimented with Free Basics, which provided free access to basic Internet services as a partnership with service providers. However, facing severe criticism for being discriminatory, it soon pulled out of the idea after differential pricing was disallowed by the telecom sector regulator.

Vanshika Sharma
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Heya Peeps! I am a management student keen to explore what's happening around and writing about it!
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