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How Jio - Facebook deal will impact big market players of telecom industry

Facebook announced an investment worth Rs 43,574 crore ($6.22 billion) in Mukesh Ambani'sJio Platforms Limited. With this investment, Facebook will have a 9.99 percent stake in Jio Platforms hence becoming the largest minority shareholder. It has been regarded as the largest deal in India’s technology space.

The Facebook-Jio Platforms deal values the Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value. This has been agreed at a conversion rate of Rs 70 to a US Dollar.

Facebook said, "Our main goal is to provide new opportunities to businesses of all sizes, but majorly for the 60 million small businesses all over India. They account for the majority of jobs in India and are the heart and soul of both the rural and urban communities. Due to the coronavirus, it is crucial that we both combat this pandemic now, and build the foundation to help people and businesses in the coming years."

We have compiled the key pointers about the impact of the Facebook-Jio Platforms deal in the country. These are:

Ease for the Customers

This deal will most likely give a boost to the JioMart project by RIL. For instance, with JioMart (the small business initiative by Jio) and WhatsApp together, the customers will easily be able to connect with the businesses and get to purchase the products in a seamless mobile experience. The user experience of these services will be outstanding.

Increased Penetration of Facebook

As a result of this deal, there will be an increase in Facebook's penetration in the country. In the last five years, over 560 million people in India have successfully gained access to the internet. The Jio Platforms alone have a user base of 388 million. Facebook has a minority stake in both the social commerce firm Meesho and the popular online education startupUnacademy.

Reliance Industries will most likely become the market leader

RIL has been trying to get into strategic partnerships across all of its businesses while also trying to deleverage its balance sheet. RIL could possibly leverage the technological expertise at Facebook. Other than this, the deal would help the company to achieve the goal of zero debt status by the month of March 2021 and to secure the top spot for its JioInfocomm telecom business.

Facebook's plans of Joint Ventures with Indian Companies

Facebook has more than 400 million WhatsApp users in India alone. The company is planning to launch a payment app in India. Hence, having a local partner will help them to navigate all possible regulatory issues, including the issue related to privacy and local storage. Facebook has been investing in India for years now and has a strong belief in the entrepreneurial talent of the country and this is an opportunity to help create a meaningful impact for the Indians and the Indian businesses using their platforms.

Digital Solutions for Small Businesses

This Facebook-Jio Platforms deal will allow the Jio conglomerate to pay off its debts and helps the expansion of Facebook in India. The Facebook-owned WhatsApp and Reliance’s e-commerce venture JioMart will be collaborating to provide digital solutions for small businesses, merchants as well as the farmers. This is a game-changing collaboration

Read More: Infosys to honor all new job offers, suspends promotions and salary hikes

Growth of the Digital Economy in India

This deal is the largest FDI made in the technology sector of the country. Now, it has been expected that Facebook will be penetrating deeper into the Indian market with the building of new startups providing innovative solutions for a developing country like India. This also is a sign of the fact that the US and India Tech Partnership will keep growing.

Aims to achieve PM Modi's Digital India Mission goals

Mukesh Ambani, Managing Director at Reliance Industries Ltd said in a statement, "The synergy between Jio and Facebook will help in achieving PM Modi's 'Digital India' Mission with its two major goals -'Ease of Living' and 'Ease of Doing Business'. In the post-Corona era, I am confident regarding the country's economic recovery and revival in the shortest period of time."

Impact of the deal on Bharti Airtel and Vodafone India

This mega-investment is expected to send a shock throughout the Indian telecom industry, impacting Bharti Airtel and Vodafone Idea. With WhatsApp being the dominant OTT messaging platform in the country, Jio will now have a way to promote their other digital services directly to the customers of its competitors. With time, it may even try to use its WhatsApp relationship to convert the customers of Bharti and Vodafone Idea to use the Jio network. This will be a negative development for both these competitors.

Impact of the deal on India's Telecom Industry

It is believed that this development would most likely shake up the already stressed telecom sector of India. The Telecom industry has a debt of about Rs 7 lakh crore, and both Bharti Airtel and Vodafone India owe a combined amount of nearly Rs 90,000 crore to the government following the adjusted gross revenue (AGR) fallout happened recently.

Picture Source: The logical Indian, Business Today

Also Read: PM KISAN: 17793 Crore Rupees Released to 8.69 crore farmers 

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