Updated: Jul 14, 2021
Facebook acquired a 9.99% stake in Reliance Jio for a whopping $5.7 Billion. This investment puts the value of India’s newest and biggest telecom giant to about $66 Billion. Crazy right?
But there’s more to this deal than just an investment. In Mergers and Acquisitions there is a term which is very commonly used called deal synergy. It denotes how well the involved companies can make the best use of their resources to gain a previously unattainable edge.
Jio-Facebook is probably the best example of deal synergy in recent times. Let’s see why:
Jio has a total of 388 million subscribers in India, Facebook app has about 300 million users and Whatsapp has about 400 million users. Now do you see what we begin to see? No? Fret not.
Jio-Facebook together could monopolize Indian internet services!
Facebook has always seen potential in India and has tried to enter in various ways to reap the benefits of a country with huge user base. Take Free Basics, an initiative by Facebook to make it a gateway to the internet by providing few apps by facebook for free. But despite the seeming advantages of having free internet Free Basics was ultimately banned as it violated India’s Net neutrality laws. Since then, Facebook has always looked for a way to come back.
For foreign companies, it is always easier to do business in India with a strategic partner in India. There aren’t any better than Jio in this aspect for Facebook. For instance, take the example of Whatsapp Pay, Facebook had to go through many pains to get it launched in India, but now with Jio onboard things seem to be shaping up nicely. It will also help in fulfilling Jio’s vision in the form of “Jio Mart”-WhatsApp will empower nearly 30 million Indian Kirana (grocery) shops to digitally transact with every customer in their neighborhood through JioMart, which will offer customers free express grocery deliveries from neighborhood mum-and-pop stores. Facebook, through its investment in Meesho, is already evaluating the SME space for e-commerce in India. Shopping in India could transform into a giant monopoly by orders being placed on Whatsapp. Also, imagine what all they could achieve by sharing the data of consumer behavior and trends on Facebook and Instagram. Jio could leverage it to model products according to user preferences. Jio Mart in return could provide consumption patterns back to Facebook which could add to the advertising revenue of Facebook.
We are sure that Jio-Facebook have much more hidden up their sleeves. Let’s wait and watch…it really can’t get more perfect than this!!