By Nehaa Chaudhari & Arpit Gupta, Ikigai Law
With its Rs 43,574 crore investment, Facebook is now Reliance Jio’s largest minority shareholder. This was accompanied by a pact between WhatsApp and Reliance Retail to boost the latter’s JioMart platform.
In July 2019, Facebook invested in Meesho, an Indian social commerce company that connects buyers and sellers on social media. Similarly, the plan with JioMart focuses on connecting kirana stores to customers.
This investment gets Jio easier access to hundreds of millions of users across WhatsApp, Facebook and Instagram, financial and technological muscle, and a better balance sheet.
For Facebook, it means access to over 370 million Jio subscribers, a partnership with one of India’s largest tech companies with a play in telecom services and infrastructure, cloud storage (JioCloud), digital entertainment (JioTV and Jio Cinema), payments (MyJio), communication (JioChat), cybersecurity (JioSecurity), ecommerce (JioMart), health tech (JioHealth-Hub) and IoT (JioMotive for smart car connectivity), and the opportunity to launch new products (e.g., Lasso) through Jio’s vast customer network.
A strategic partnership with India’s largest telecom operator will also be key to Facebook’s future technological plays, particularly in virtual reality (VR) and Internet of Things (IoT), the success of which will depend on access to 5G. Jio has, reportedly, developed its own end-to-end 5G technology, and has sought the approval of the Telecom Authority of India (Trai) for 5G trials.
Facebook has previously partnered with a telecom provider in Japan to provide augmented reality (AR)/VRbased products using 5G networks. It also runs the ‘Telecom Infrastructure Project’, which aims to create open source telecom equipment to promote affordable telecom infrastructure in under-connected areas. Some member companies have expressed concerns over the project’s potential to turn Facebook into a powerful telecom player.
Telecom is heavily regulated in India. As such, this investment in Jio Platforms may give Facebook access to the 5G technology and telecom infrastructure that it needs, while being sufficiently insulated from the accompanying regulatory scrutiny and compliances.
This investment in Jio is Facebook’s third in India, after Meesho and Little Eye, a startup building analysis tools for mobile app developers. The tie-up, as Facebook’s press release on the Jio deal states, is pitched as the company investing in India’s future. This is helped by the perception of Reliance Jio as the ‘poster-child’ for the ‘swadeshi’ digital movement in the country. Reliance Industries Ltd (RIL) chairman Mukesh Ambani has spoken about the need for data sovereignty and strengthening Indian small businesses.
The company has also supported the GoI’s data localisation policies in the past. In contrast, GoI has been understandably wary of, and ‘less than kind’ towards, large foreign tech companies and their contrary positions on key issues, particularly related to data storage and protection. In the face of such shaky relations, the idea behind this strategic partnership may also be to allow Facebook develop a better relationship with ‘key decision-makers’.
The optics of the deal — being focused on helping and partnering small and medium enterprises (SMEs) and kirana shops, as opposed to competing with them — are also sought to soften adverse reactions and criticisms from the government and domestic lobbies. This debate will, undoubtedly, influence how India thinks about regulating Big Tech.
These conversations are fairly nascent in India, compared to many other jurisdictions around the world, particularly the US and EU. Just on the digital payments front, both MyJio — which already offers UPI payments and recharge services — and WhatsApp Pay — which received NPCI approval in February — could easily dominate the market.
Facebook and Jio together also have access to vast troves of personal information, even as India is yet to finalise a personal data protection law. News reports already point to Jio plans of creating a super-app, which could also result in the creation of an ecosystem of apps. Indian startups have often spoken about the difficulty, or inability, to compete with big tech companies and their impact on the Indian tech ecosystem. This deal and its implications for the Indian market attract similar concerns.
Only time will tell if ‘India’s digital sarvodaya (universal service)’ that Mukesh Ambani spoke about in a media statement after the Jio-Facebook deal was announced on Wednesday will be for everyone. Or if this will just be a sequel to what Reliance Jio did to the Indian telecom market.
(Chaudhari and Gupta are policy director and associate, respectively, Ikigai Law. Views expressed above are their own)
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