Amid the gloom and doom of Covid-19, Facebook’s investment in Reliance Jio was a spot of sunlight. The Rs 43,574 crore deal gave Facebook a 9.9% stake in Reliance Jio in addition to a strong foothold into India’s growing economy while giving Reliance a chance to come out of their debt. Both Facebook and Jio are strong players known to dominate their respective markets and this partnership is set to shake up the Indian economy.
Both parties stand to gain from what is said to be the biggest foreign direct investment in the tech sector in India. Facebook has already established itself in the social media platform and hopes to get a stronghold in e-commerce in India. For Reliance, through Jio it will gain access to the high-level tech and reach of Facebook. At the annual general meeting in August 2019, Mukesh Ambani had announced that Reliance was aiming to be debt-free in 18 months, and given the current environment with the slump in business, it would have been impossible to meet the target had it not been for this investment. Both companies are active in the field of blockchain technology and could explore blockchain crypto-related initiatives in India.
Mark Zuckerberg had said in a statement post the news that through this partnership, Facebook was looking to creating more opportunities particularly for the small businesses given the crucial role they play in our economy. True to their words, only a few days after the deal was signed JioMart went live through WhatsApp. Currently active in a few areas in Mumbai (Navi Mumbai, Thane, and Kalyan), customers can place their orders online and pay at the store. JioMart is an online to offline business platform working with several small businesses as well as Kirana stores. Once a customer registers and updates their grocery list, it identifies the closest store to the customer and places the order. When the order is ready, customers will receive a message and they can go and pick up their order. It is expected to be introduced in other cities soon and will go a long way in providing improving the reach of small businesses.
While this deal is a step forward in digitizing India, it is worrisome to established players of the digital payment market like Paytm and PhonePe. Facebook is all set to enter the world of digital payments through WhatsApp Pay. Currently, it is just at the testing stage but with Reliance it gets the edge that it needs to deal with the Indian regulations and launch the feature sooner. Given that WhatsApp is an extremely popular application, the launch of WhatsApp Pay would make it more convenient for the users and thereby threatening all the existing players including Google Pay.
One of the major concerns that were raised was that this deal would violate net neutrality with Facebook and WhatsApp getting preference on the Jio network. This fear was put to rest with Jio Infocomm’s strategic head affirming that the telecom operator would follow the net neutrality laws. The Broadband India Forum (BIF) also stated that Facebook and Jio being members of BIF and are aware of the importance of net neutrality. In addition to this, they pointed out that these fears were baseless as the net neutrality rules are written into the TSP license and cannot be violated.
While the deal is not without its hiccups with both Facebook and Jio disagreeing on key issues like data collection and storage; Reliance maintains its stand that data servers should be maintained in India whereas Facebook is against data localization the two companies are positive of working out issues stating as individual entities that operate separately difference of opinions are normal. It will be interesting how they work out these kinks especially since Facebook’s stance is against Indian laws.
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