MUMBAI – Facebook plans to invest US$5.6 billion in the digital subsidiary of Reliance Industries, India’s most valuable company, which is owned by the country’s richest man, Mukesh Ambani.
The US-based social media giant will invest in the country of one billion internet users with one of the cheapest data rates in the world.
“Facebook will acquire a 9.99% stake in Jio Platforms, a next-generation technology company building a digital society for India by bringing together Jio’s leading digital apps, digital ecosystems and high-speed connectivity platform under one umbrella,” Reliance said in a statement on April 22.
The investment could potentially be a boost to India’s quest to speed up the use of digital payments and doing other business online. Of India’s 1.38 billion population, more than 1.17 billion own a mobile handset, half of which are smartphones.
About 615 million people have access to broadband, with Reliance Jio commanding a 57% market share, followed by 21% by Bhartii Airtel and Vodafone’s 18%, according to Telecom Regulatory Authority of India data.
Prime Minister Narendra Modi’s government has been pushing for the use of digital transactions since it gained power in 2014. Its initial attempt to push digital financial transactions during the demonetization of 86% of currency notes did not meet with much success.
Over the years, the use of data has increased significantly, mainly because of the sharp drop in user charges and increased familiarity of use.
Facebook said it wanted to link up the “power of WhatsApp,” its messaging subsidiary, with Jio, which is taking a fast-growing share of the online sector to increase digital business. India has 400 million of Facebook’s 2 billion users across the globe. Jio Platforms provides internet and e-commerce services that tap into the huge subscriber base.
India’s cost of data is the lowest in the world with one GB of data costing $0.26, compared with $3.67 in Singapore, $4 in Hong Kong, $9.89 in China and $12.37 in the United States, according to data compiled by price comparison site Cable.co.uk. It found the most expensive was $75.20 in Zimbabwe.
Globally, more than 140 million businesses use Facebook’s apps to connect with customers, and about 100 billion messages and one billion stories are sent across Facebook’s networks every day.
Reliance said it wanted to boost incomes for farmers, micro-traders and other small businesses that are the cornerstone of the economy in the country.
“We will empower 30 million kirana shops (mom and pop stores) to digitally transact with every customer in their neighborhood,’’ Mukesh Ambani, the chairman of Reliance Industries, said.
“Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector, in addition to empowering people seeking various digital services,’’ the chairman added.
Jio Platforms is owned by Reliance Jio Infocomm Ltd that provides connectivity platforms to more than 388 million subscribers.
The coronavirus is also playing a role in pushing people to use more digital transactions. Analysts expect the pandemic to fundamentally change the way people do business and conduct financial transactions, even after the pandemic is over.
“We expect the lockdown and social distancing to inculcate the habit of using digital tools, thereby increasing the importance of quality telecom services,’’ Pranav Kshatriya and Sandip Agarwal, analysts with Edelweiss Securities, wrote in a note to clients. “According to Google Trends data, the lockdown announcement led to a 3x jump in ‘broadband’ search in India.’’
Though unlisted, the investment by Facebook values Jio Platforms at $65.95 billion. This could value Jio Platforms amongst the top five listed companies in India by market capitalization, only three and a half years after launching its commercial services.
The investment by Facebook is the single largest foreign direct investment in the technology sector in India and the largest investment for a minority stake by a technology company anywhere in the world, the company said.
Jio said it had built a world-class digital platform powered by leading technologies such as broadband connectivity, smart devices, cloud and edge computing, big data analytics, artificial intelligence, Internet of Things, augmented and mixed reality and blockchain.
Morgan Stanley as financial advisor and AZB & Partners and Davis Polk & Wardwell as counsels advised on the transaction.
Shares of Reliance surged after the announcement, trading 10% higher at Rs 1,359.50 on the Bombay Stock Exchange at 1:52pm local time.