Facebook's next investment in India may be Mark Zuckerberg's most important — in Asia's richest man Mukesh Ambani

• The Facebook-Jio deal is reportedly sized in “multi-billion dollars” while some analysts estimate the value of Reliance Jio at $60 billion, which suggests that the Facebook deal could be worth $6 billion.
• This is not the first time that Zuckerberg has tried for a larger footprint in India but the last time, he had partnered with Anil Ambani whose fortunes have been diminished significantly since then.
• However, investing in a firm owned by the country’s richest man now, Mukesh Ambani, may give Facebook the best bang for the buck without the operational and regulatory challenges that come with setting up new businesses in another country.

Facebook is reportedly looking to acquire a 10% stake in the Mukesh Ambani-owned Reliance Jio. This would allow the social media giant to expand its digital presence in the Indian market by tapping into Jio’s subscriber base of over 370 million, which is bigger than the entire population of the US.

However, this isn’t the first time that Mark Zuckerberg’s come knocking on India’s door. His maiden attempt in 2013 was a grand promise of free internet and a 10-page plan, called Internet.org and Free Basics, in partnership with Mukesh’s brother Anil Ambani, whose telecom venture, incidentally, declared bankruptcy earlier this year.

It was curtains for the first Ambani-Zuckerberg tie-up after the Indian government bowed in front of the massive backlash from those who sought ‘net neutrality’.

Since then, in 2014, Facebook acquired Little Eye Labs — a startup based out of Bengaluru that was working on a software tool to analyse the performance of apps on Android phones. It has also invested in Indian startup Meesho, an e-commerce company that leverages social media to connect customers with resellers last year. In February 2020, it made its third investment in edtech startup Unacademy.

None of them compare to the scale and potential of the proposed deal talks with Reliance Jio, a unit of Reliance Industries, one of India’s biggest conglomerates owned by Asia’s richest man, Mukesh Ambani. Zuckerberg is hoping that he has knocked on the doors of the right Ambani.


The Facebook-Jio deal talks

The Facebook-Jio deal is reportedly valued in “multi-billion dollars”, according to a report by the Financial Times. The Mark Zuckerberg-led company was close to signing a preliminary deal, but the Coronavirus pandemic has stalled it.

Launched in 2016, the three-and-a-half-year-old Reliance Jio is valued at $60 billion by analysts at financial services firm Bernstein. A 10% stake would fetch the company $6 billion (approx. ₹45,000 crore). The current market capitalisation of the entire Reliance Industries, of which Reliance Jio is a part, is ₹6.5 lakh crore.

Jio is also reportedly in talks with Google, although details in this regard are not known yet. The deal talks may also be scuttled by the ongoing coronavirus pandemic but if and when they resume, the rationale for Facebook to pay top dollars for Jio’s shares are clear.

Here’s why Facebook may want a stake in Reliance Jio

What Zuckerberg and the younger Ambani sibling aimed⁠— provide internet access to all, as per their own stated goals ⁠— Jio has already achieved in less than three years of existence by just driving down the cost of data so low that millions of India’s poor could afford it.

In a little over three years, Jio has gone from zero to capturing nearly 35% of the total subscribers in India. After offering free data and voice services to its users for six months, Jio changed the telecom landscape in India by offering high-speed 4G data at throwaway prices along with free voice calls.

While Mukesh Ambani may claim altruistic intentions, just like Zuckerberg and Anil Ambani did in 2013, Jio’s aggression was intended to capture market share from incumbent players like Airtel and Vodafone-Idea who have been entrenched in the market for decades.

Apart from telecom services, Jio also offers a suite of apps including JioSaavn, JioTV and JioCinema. It also has a foot in the e-commerce business via JioMart, which was soft-launched earlier this year in partnership with Reliance Retail.

Facebook's next few millions

Although Facebook has a huge user base in India, 740 million in all, via its social media services and WhatsApp, this is one of the few markets in the world with a big enough headroom for growth, given the sheer size of the population.

India’s internet users are estimated to increase by more than 70% in the next four years, according to a Cisco report. And Jio, with its entire array of services from telecom to e-commerce to music, movies, and content, may be a holistic way of tapping into the market without having to face the operational challenges that come with it.

Not just big, India is also a tough market both in terms of competition and regulation, something Zuckerberg may have learnt while trying to launch WhatsApp Pay services in the country. Being friends with the country’s richest man may prove to be useful.

See also:

Three-year-old Jio is now making $2 billion in 3 months ⁠— and it is weeding out the low-spenders and making data addicts pay more

Mukesh Ambani’s Reliance Jio becomes the largest telco by revenue and subscribers - as industry shows signs of recovery