Tie up of Reliance & Facebook with Impact on India
Recently, world's largest internet company facebook, bought 10% stake in India's largest telecom company Reliance. The deal has been finalized for $5.7 billion which will accelerate the commerce platform of both Reliance and Facebook.This deal has raised many eyes on speculation about who will be mostly benefited with this & what impact it is going to make on its shareholders.
Recently, the world's largest internet company Facebook bought a 10% stake in India's largest telecom company Reliance. The deal has been finalised for $5.7 billion which will accelerate the commerce platform of both Reliance and Facebook.This deal has raised many eyes on speculation about who will be most benefited with this & what impact it is going to make on its shareholders.
Why facebook chose Jio ?
It sounds legit for Facebook to join hands with Jio as it is the only predator in the country of telecom sector which has single handedly put Airtel & Vodafone in debt overnight with free internet & calling services. Now, Jio has maximum user-base taking its service but a huge portion of India's population is still left to access smartphones. Already Mark has lost his business in China with imposed bans on Facebook so the second largest populated country is a vital source of revenue generation. Another speculation is that Facebook's Whatsapp is trying to launch Whatsapp Pay service but has not got approval yet from the Indian government because Facebook is not ready with the data localisation rules. Mark is excited to launch this service especially in India where online payments and transactions are a hot thing these days letting companies like GooglePay, PhonePe, PayTM making huge profits. So here, Reliance can be the shoulder for Facebook's desired mission with this tie up.
Jio's debt management plan
Soon after when Ambani launched Jio's free telecom plan in India, it started gaining attention with addition of over 10 million users every users. In three years, Jio hit the milestone of 370 million users in Dec 2019. However this achievement also added the massive debt at at Rs 1.53 lakh crores. In order to manage this debt, Reliance had to plan for another milestone. Initial step taken was Reliance by forming two trusts, Infrastructure Investment Trusts (InvITs) - Digital Fibre Infrastructure Trust and Tower Infrastructure Trust. RIL transferred Reliance Jio Infratel's fibre and tower businesses into these trusts along with a gross debt of Rs 1.07 lakh crore.
Brookfield Asset Management invested Rs 25,215 crore in the Tower Infrastructure Trust, which has 51 per cent stake in Reliance Jio Infratel.
Another plan to manage the debt is to sell 20 per cent stake in RIL's oil and petrochemicals business - which has two refineries and a petchem complex in Jamnagar, Gujarat to Saudi Aramco for Rs 1.1 lakh crore. But the deal is likely to get delayed because of Covid19 and the crude price crash.
Speculative ideas behind this tie up
Strong speculations are that they want to collectively form a Mega App where users from reading news online, making payments for everyday chores, shopping & chatting to their family and friends, everything will be done under one app same as WeChat for China. Currently, social media and payment platforms are two separate bases, different industries. Reliance has its presence in almost every sector in India from fashion to petroleum, but social media and payment platforms are left untouched by this company. Reliance's capability of reaching the Indian population in almost every neighborhood, up to the last mile must have attracted Facebook to join hands together.
Adding to this, experts also believe that the Covid19 outbreak has upsurged the demand of online buying groceries in India. Since the deal has been finalized suddenly during the lockdown phase, chances are to promote JioMart services of buying groceries through local Kirana stores by easily using Whatsapp. Now, imagine the data mining happening at the ground level of every activity happening on Whatsapp for every purchase you make. The figures are unimaginable as the collected data will be huge enough to talk about buying segments, preferences even the budget of expenditure will not be private. However Jio official has declared that deal has been made for specific areas & there are also areas for which the clause has been declined.
Prior to Jio Platforms, Facebook had invested around $20-25 million in social commerce platform Meesho in 2019 and participated in a $110 million funding round for Edu-tech company Unacademy earlier this year. However, we look forward to the witness the changing reforms that are likely to happen but we also fear the consequences about anything that we consume digitally or physically is monitored by one entity.