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2020-04-29

Why did Facebook select Reliance Jio for the India alliance

Image:-jio and facebook

When two of the best of the world meet, its reverberations can be felt all over the planet. Earlier this week, Facebook's announcement that it had invested Rs 43,574 crore for a 9.99 percent stake in Reliance Jio Platforms raised the stakes to the highest level with one single shot.

The collaboration isn't surprising at all. Mukesh Ambani's Reliance has emerged as the only Indian company in the fast-growing domestic market capable of competing with US tech groups. They extend from mobile telecommunications and home broadband to ecommerce.

That deal makes Facebook, the social media giant, the Indian telecom network's largest minority shareholder. It also marks the largest investment by a tech company in the world for a minority stake, and the largest foreign direct investment (FDI) in India's tech space.

Jio transformed India's technology market starting in 2016 by offering free calls and cheap 4 G internet service - its mobile internet service alone has attracted almost 400 million users in 42 months. Jio's appearance on the scene has virtually annihilated well-set competition, including Airtel and Vodafone, widely welcomed by users hamstrung by slow 3 G connections and high tariffs.

Over the past few years, India has undergone a rapid digital transformation and it would be accurate to say that Jio has contributed a sizeable chunk to this change. Because it has played a big part in bringing millions of Indians and small businesses online, Facebook will have closer access to Jio users with this investment.

The potential in its sweep is breathtaking for the US firm through this collaboration. India has 400 million WhatsApp users-the global messaging app for Facebook-and 300 million Facebook users. So the popular global social networking website is now working on collaborations with one of the largest telecom service companies in one of its biggest markets, which drives the same market. This one is surely made in heaven, as far as the alliances go.

It helps to think and act big. That Reliance has left far behind local competition to compete with its global peers, is to state the obvious. The Jio-Facebook deal comes after Microsoft announced last year that it plans to partner with Jio to offer businesses cloud computing.

India has emerged as a critical market for Facebook and its messaging platform WhatsApp. According to consultancy PwC, the number of internet users in India is expected to increase to around 850 million in 2022, from 450 million in 2017.

It is now estimated that Facebook generally has more users in India than any other country. According to Counterpoint Research, India outstripped the US last year to become the world's second-largest smartphone market after China by unit shipments, making it a top priority for Silicon Valley companies as well as an eye-catcher for their rivals in China, much maligned now after Covid-19. This could well mark the start of similar alliances for global tech firms seeking partnerships in India, wanting to thumb their noses in China.

That Reliance has made the Indian market tempting even more commendable for Silicon Valley companies, given that the government has added restrictions to overseas businesses, such as its proposed Personal Data Protection Bill.

After the deal was inked, Facebook chief revenue officer David Fischer and Facebook India managing director Ajit Mohan said in a joint interview that JioMart would be a potential collaboration. WhatsApp has been working for years on developing tools for small businesses and taking an avid interest in payment systems. Facebook has pursued similar goals, too. By bringing together JioMart, which is Jio's small business initiative with WhatsApp, Facebook plans to connect people to businesses, shops and buy products, giving them an opportunity to discover new products. Such thinking reveals an innovative attitude and creativity with which Indian businesses – caught up in today's rigmarole – could do well.

The investment from Facebook will help with Jio, one of the fastest growing companies in the world, which justifiably has ambitions to take on Amazon in e-commerce, provide fiber networks, run data centers and set up new services such as telehealth and distance learning.

With this deal, Facebook stands to gain substantially too. Mukesh Ambani is a prominent Indian voice whose views on business and other matters carry considerable weight. To leave a bigger imprimatur in India can certainly help the American social networking site.

The Jio-Facebook deal will ultimately speed up India's push for 'Digital India' This may come with a double advantage for this country in the midst of the COVID-19 pandemic and the economic slump-driving the digital transformation and regulating the economy. Mukesh Ambani, with JioMart and WhatsApp, said in his video message that it would be possible to digitally transact around 30 million neighborhood stores. Surely, it suggests a transformative shift in the way business is done in India.

For Facebook, gaining a huge user base is a tempting thought due to the rise of China's TikTok which has accumulated more than 250 million users in India. The metamorphosis would be well and truly complete with Facebook's attempt to build a similar service named Lasso with Jio in their corner.

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