Facebook-Jio: A big deal to worry about

Facebook-Jio: A big deal to worry about

FILE PHOTO: A 3D-printed Facebook logo is seen placed on a keyboard in this illustration taken March 25, 2020. REUTERS/Dado Ruvic/Illustration/File Photo GLOBAL BUSINESS WEEK AHEAD

The deal between Facebook and Reliance Industries, by which the social media giant acquired a 9.99% stake in Jio Platforms, the holding company of Reliance Jio Infocomm and Reliance Jio Digital Services, is not only the largest-ever deal in the technology space in India but also expected to be the most impactful of such deals in the country. The deal, worth Rs 43,574 crore, is naturally complementary and accretive for both companies and has a large sweep across several digital businesses.

Facebook has valued Jio Platforms at Rs 4.62 lakh crore, and the deal will help Reliance to reduce its debt burden. Reliance has been actively trying for this. Last year’s deal with the Saudi oil major Aramco, too, was one step to pare debt. The deal with Facebook also shows the new directions that Reliance plans to take, in line with its chairman Mukesh Ambani’s belief that “data is the new oil”. 

The aim of the deal is to create synergies and linkages between Reliance companies in the retail and telecom sectors and Facebook’s platforms like WhatsApp. Reliance Jio has the largest telecom user base in the country and the parent company recently launched JioMart as a marketplace to connect local retailers with consumers. Facebook’s WhatsApp messaging service has a reach of 400 million consumers, and it has a payment platform with about a million users. It is being scaled up. The deal will lead to the acceleration of business on the JioMart platform using WhatsApp and will connect millions of retailers and consumers in the country. Facebook has had problems with some of its initiatives like Free Basics in India, but it will now get a big entry into the Indian e-commerce market. The deal will help the two companies dominate the market. 

That possibility has raised concerns about the deal. Both companies are leaders in their sectors and their coming together might lead to the suppression of competition and marginalisation of other players. Such dominance is not healthy business and could hurt consumer interest. There will also be issues related to net neutrality because the collaborating entities can give preference to each other, to the disadvantage of others. The handling of the huge amounts of personal and business data collected by them will also be a matter of concern, especially because the country does not have a strong data protection law. These issues will have to be studied closely by the regulatory authorities before they give their approval for the deal. The coming together of such powerful entities in the business field may even have political consequences.