(Business Today)

Initial informed rumours have finally culminated in an official announcement a few hours ago.  Facebook will invest an amount of Rs. 43,574 crores for a 9.99 percent stake in Reliance Jio Platforms. The limited percentage is probably to prevent the investment from facing a regulatory hurdle before the C.C.I.

(Official  video statement by Mukesh Ambani via Moneycontrol)

Financially, it makes sense for Reliance. It has for some time now been scouting for means to reduce Jio’s growing debt burden, and with the Reliance – Aramco investment deal definitely on hold for the foreseeable future as a consequence of the oil market debacle, it seems to have worked out fine for him (AS USUAL, if I may add). And an operations and commercial tie up with Facebook can only accelerate Jio’s growth and dominance in the country, and perhaps, over time even abroad (Africa is still one of the major markets with relatively low mobile and internet penetration).

Facebook, on the other hand, is relishing the opportunity to take another crack and penetrating the Indian market beyond social media (Remember the PR disaster that was “Free Basics” ?? – Our previous posts can be found here and here). And what better way to do it than to invest in the telecom company with officially the largest user base in India as well as revenue. Add to this the double icing on the cake which is the series of acquisitions made by Jio over the last three to four years with the obvious intent to create a formidable digital platform and the Promotor of the Company being without a doubt the biggest corporate influencer in the country.  In fact, subject to correction, “Free Basics” seems to have been the first attempt by both the companies to try to work together and this is the second major attempt. Looks like Facebook has learnt a few lessons from its previous debacle.

While my previous concerns with Facebook’s attempts to penetrate the Indian market were primarily concerning network neutrality and the threat of information manipulation which accompanies Facebook everywhere in its “walled garden”esque operation style, a lot has happened since then. Typical of technology, issues concerning such investments have now jumped to a whole new dimension, where every big technology company is under scrutiny in multiple jurisdictions on competition and privacy concerns.  In the past, the transaction probably shouldn’t have raised much concern for competition enforcers because Reliance would not be competing directly with Facebook. Today however, concerns are mounting on how tech companies are leveraging their control over data to push their own dominance not just in their original market, but also across vertical segments. And Facebook’s acquisition of both WhatsApp in 2014 and Instagram in 2012 has already created a Social Media behemoth which many worry about.

Even though C.C.I. has only recently begun to take nascent steps in examining Big Tech transactions, there is an additional dimension to the Reliance – Facebook tie up which definitely merits the C.C.I. taking the transaction seriously. My personal opinion is that this will definitely go through without any major hiccup, but how the two companies cooperate commercially is something to keep a watch on. Jio has today forayed into almost every form of digital media, including social media (Jio Chat). This coalescence which one sees in Jio’s acquisitions is however, not innovative. It is merely copying the playbook of a number of companies all across the planet, the most notable and successful examples being Alibaba and Tencent, of building entire ecosystems of digital media, communications and commerce with B2B and B2C connect. Google appears to have succeeded the best at this outside China, with a Google ID sign in now becoming a norm for most login transactions and a Google App available for almost every internet transaction you can think of. (On a side note, Google’s acquisition of FitBit has also raised similar concerns). Consequently, the lines between social media and other forms of entertainment have blurred over time.  Facebook was simply late to the game, and is now playing catch up, and since it suffers from no dearth of cash, such investments help it to gain ground quickly, with a long term potential growth with Jio helping it to succeed where it has managed to only take a few tottering steps till now.