Facebook acquires Jio stake in world’s largest minority holding deal

Facebook acquires Jio stake in world’s largest minority holding deal

Facebook has become the largest minority shareholder in India’s Reliance Jio by acquiring a 9.99% stake in its digital unit for US$5.7 billion.

The deal is Facebook’s largest since its acquisition of WhatsApp in 2014, and its biggest overseas investment as well as the largest foreign direct investment in India’s tech sector.

The operator has stated that Facebook’s investment is currently the world’s biggest by any tech firm for a minority stake.  The scope of the agreement underlines the social media giant’s interest in India, which is its largest global market.

Jio Platforms is the digital arm of Reliance Industries and manages Reliance Jio, which is India’s market leading mobile operator. The deal awards Jio Platforms a pre-money enterprise value of around $66 billion, placing it in India’s top five listed companies based on market capitalisation.

A joint statement from Facebook’s chief revenue officer David Fischer and MD for India Ajit Mohan noted that the deal would create “new ways for people and businesses to operate more effectively in the growing digital economy”.

One example given was a plan to align Jio’s small business platform JioMart with WhatsApp, allowing consumers “to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.”

News of the deal saw Reliance Industries’ shares leap 10% on the Mumbai Stock Exchange, allowing chairman Mukesh Ambani to regain his title of Asia’s wealthiest person from Alibaba’s Jack Ma.

Since launching in 2016, Jio has become India’s largest operator and is now positioning itself as an eCommerce leader. Jio noted that Facebook’s investment would help “small businesses across India and create new and exciting digital ecosystems”.

With India’s smartphone sector booming, Facebook CEO Mark Zuckerberg evidently sees the potential for pushing the firm towards eCommerce. WhatsApp has attempted to launch a mobile payments service in India but has been stymied by regulators for its role in spreading fake news, as well as due to concerns over data privacy.

The Jio deal may help to ease Facebook’s move into this sector of India’s market. In a Facebook post, Zuckerberg noted that “India is a special place for us” and added that his company was “committing to work together on some critical projects that we think are going to open up a lot of opportunities for commerce in India.”

With 250 million Facebook users and 400 million WhatsApp users, India is a prime candidate for an eCommerce play. WhatsApp’s payment offering – which would enable in-app money transfers between users - is currently being tested, and India could also be a trial market for Facebook’s long-mooted Libra cryptocurrency.

Despite pushing into eCommerce, the companies have clearly stated that they do not intend to create an Indian equivalent of Tencent’s WeChat, which began as a messaging and payments service but has become increasingly essential for participating in Chinese society. Mohan stated that: “the intent is not to build another app, the intent is really for the two companies to collaborate.”

Facebook and Jio will now seek approval for the deal from Indian regulators. Based on Facebook’s track record in the market, it could face an uphill struggle; a 2019 proposal to launch a payment feature in WhatsApp was met with resistance, and its encrypted content regulation has come under fire.

It also ran into trouble over its Free Basics service in 2015, which was aimed at providing free access to certain internet sites. It was canned after regulators argued that it amounted to zero-rating, and therefore violated India’s net neutrality principles.

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