What is Jio Platforms, Facebook’s new $6 billion bet in India?

April 22, 2020, 11:39 AM UTC

On Tuesday, Facebook announced a $5.7 billion investment in Jio Platforms, taking a 9.9% stake in India’s largest mobile telecom provider. The deal will provide Facebook and CEO Mark Zuckerburg direct access to Jio’s 370 million subscribers and a strong foothold into a booming mobile market.

Facebook, the tech giant long known for a philosophy of “move fast and break things,” may have found a kindred spirit in its new partner, a company that has upended India’s tech sector and is poised to disrupt the country’s booming e-commerce scene.

From sibling feud to tech giant

In 2010, a little-known Indian Internet service provider called Infotel Broadband Services Limited (IBSL), which ranked No. 150 among India’s ISPs, staged a coup in an India broadband spectrum auction, spending $2.7 billion to win access to bands in every one of the country’s 22 provinces.

Shortly after the auction, Reliance Industries, an Indian conglomerate under the direction of Mukesh Ambani, took a 95% stake in IBSL. The timing of the deal prompted wide speculation that Ambani had prearranged the purchases with IBSL. Competitors in India accused IBSL of breaking auction rules by not acknowledging a previous relationship with Reliance, but a regulatory body eventually cleared IBSL of any wrongdoing.

The IBSL deal was Ambani’s first foray into telecoms since a spat with his brother, Anil Ambani, forced a split in the family business. The two had fought for years for control of their family’s textile empire turned international conglomerate following the 2002 death of their father, Dhirubhai Ambani, who founded the company. The siblings went their separate ways in 2005 when their mother brokered a deal that saw Anil take control of Reliance’s telecom portfolio and Mukesh hold on to its oil assets. But five years on, Mukesh encroached on Anil’s territory, with the purchase of IBSL coming just weeks after Anil agreed to drop a noncompete clause in the telecom sector.

In 2013, Mukesh rebranded ISBL as Jio Platforms, a name similar to another subsidiary of Reliance Industries called Reliance Jio. Over the next few years, Jio would upend the country’s mobile sector and run Mukesh’s own brother out of the telecom business.

In 2016, Mukesh invested $33 billion to construct a nationwide 4G broadband service network and offered cheap data rates and free domestic calling to boost subscribers. The move lured hundreds of millions of Indians to Jio and chased away other telecom firms, like Anil’s Reliance Communications. Along the way, Mukesh assumed the mantle of India’s richest man; his company became India’s top-ranked Fortune 500 company in 2019, with revenue over $82 billion in 2019.

WhatsApp and e-commerce

Jio Platforms has since expanded into areas like digital currencies and education; it has plans to open Jio University in 2021 to educate India’s next generation in areas like artificial intelligence. The company is also a large player in India’s cell phone market, where the company’s simple Jio “feature” phones—offering an Internet connection but few other frills—commanded 21% of India’s total handset market in 2018, a year after introduction.

The major push behind Jio’s new partnership with Facebook, however, seems to be the company’s planned launch of a nationwide JioMart e-commerce platform.

Currently, Amazon and the Walmart-owned e-commerce firm Flipkart control over 60% of India’s e-commerce market, according to market intelligence firm S&P Global. Yet these firms have been hit by recent regulations that favor domestic players like JioMart over foreign competitors.

In December, Jio Platforms conducted a soft launch of JioMart in three neighborhoods near Mumbai, offering more than 50,000 grocery products. JioMart had plans to aggressively expand in the early months of 2020, which have likely been put on hold because of the country’s lockdown amid the coronavirus pandemic.

India is the largest market for the Facebook-owned WhatsApp, with over 400 million users as of July 2019, and the companies hope to use the platforms as a tool to connect small businesses with online retail.

“Jio’s digital new commerce platform and WhatsApp will empower nearly [30,000,000] small Indian Kirana shops to digitally transact with every customer in their neighborhood,” said Ambani, in a video statement on Wednesday.

Facebook also has over 300 million Indian users on its flagship social network, and its new partnership with India’s largest telecom provider will offer new insight into an Internet market that’s expected to grow by over 200 million users in the next four years. In December 2019, Facebook managing director in India, Ajit Mohan, said that revenue per Facebook user in India was low compared to other markets, but the company aimed to invest more in the country in coming years. “It is our privilege to participate in the transformation of India, unlike we can do in China,” Mohan said. (Facebook in banned in mainland China.)

Online grocers have become a lifeblood to millions of Indians since the country went under lockdown in late March. Given its limited rollout, JioMart hasn’t benefited as much as other players. Yet once the crisis eases, Jio Platforms and Facebook may be poised to take advantage of a more savvy e-commerce market.

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