Facebook buys 9.99pc stake in Reliance Jio for USD5.7 billion

THE STATESMAN/ANN – The social media giant Facebook yesterday, announced an investment of USD5.7 billion to buy a 10 per cent stake in the Reliance Industries’ telecom arm Jio, as the company looks to expand presence in India, the largest market in terms of subscriber base and the second largest internet market after China. Company said that the investment “underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country”.

This is the largest Foreign Direct Investment (FDI) in the Indian technology sector and also the largest investment by a tech company to buy minority stake globally. Today’s early trading showed a surge in the price of shares of RIL by eight per cent after Facebook announced its investment plans.

Facebook already has 400-plus million highly popular WhatsApp chat users in India and the social media firm looks to leverage it to offer digital payment services. Having a local partner could help it in navigating various regulatory issues, including those related to privacy and local storage.

Facebook in an official statement said, “Today we are announcing a USD5.7 billion investment in Jio Platforms Ltd, part of Reliance Industries Ltd (RIL), making Facebook its largest minority shareholder.

“This investment by Facebook values Jio Platforms at Rs4.62 lakh crore (USD65.95 billion) pre-money enterprise value, agreed at a conversion rate of Rs70 to a US dollar. Facebook’s investment will translate into a 9.99 per cent equity stake in Jio Platforms on a fully diluted basis,” RIL said.

“Facebook’s investment will translate into a 9.99 per cent equity stake in Jio Platforms on a fully diluted basis,” it added.

Facebook said the investment “underscores our commitment to India, and our excitement for the dramatic transformation that Jio has spurred in the country”.

“In less than four years, Jio has brought more than 388 million people online, fuelling the creation of innovative new enterprises and connecting people in new ways. We are committed to connecting more people in India together with Jio,” it added.

A wholly owned subsidiary of RIL, Jio Platforms houses digital services of the group led by billionaire Mukesh Ambani. Reliance Jio Infocomm Ltd, with 388 million subscribers, is a wholly owned subsidiary of Jio Platforms.

The Facebook deal is part of value unlocking by RIL to cut debt. RIL has been seeking strategic partnerships across its businesses while targetting to deleverage its balance sheet.

The group has also been in talks with Saudi Aramco for sale of a 20 per cent stake in its oil-to-chemical business for an asking of USD15 billion. RIL has already tied up with BP Plc for fuel business as it targets to have a debt-free status by next year.

Jio had also been reportedly talking separately to Google but the fate of those discussions is not known.

Having a good telecom partner could also help Facebook improve its reach to masses.

RIL could leverage on Facebook’s technology expertise and talent pool as well as help in its ambitions to make Jio a digital company. The deal would aid the company achieve zero debt status by March 2021.

Since launching Jio in 2016, RIL has emerged as the only Indian company capable of competing with United States (US) tech groups in the fast-growing Indian market, expanding from mobile telecom into everything from home broadband to e-commerce.

Jio has emerged as the number one telecom operator in India, both in terms of traffic as well as revenue in a virtual two-player market since the third player, Vodafone-Idea is struggling under regulatory burden. Jio’s main competitor is Bharti Airtel.