Wednesday, 08 April 2020

Facebook wants a multibillion-dollar piece of Reliance Jio

by Harry Baldock, Total Telecom
Wednesday 25 March 20

A preliminary deal for 10% of the Indian mobile giant has reportedly been scuppered by the coronavirus pandemic

Since Reliance Jio burst onto the Indian mobile scene back in 2016, the company has caused a huge upheaval in the local market. Its aggressively low prices have seen its primary competitors, Vodafone Idea and Bharti Airtel, struggle to keep up, with both now facing uncertain futures in the wake of enormous adjusted gross revenue payments imposed on them by the government…

Since Reliance Jio burst onto the Indian mobile scene back in 2016, the company has caused a huge upheaval in the local market. Its aggressively low prices have seen its primary competitors, Vodafone Idea and Bharti Airtel, struggle to keep up, with both now facing uncertain futures in the wake of enormous adjusted gross revenue payments imposed on them by the government.

Jio, meanwhile, has continued diversified its services, expanding into everything from home broadband and e-commerce, looking to hold its own against encroaching US tech giants like Facebook and Google.

Now, the Financial Times reports that Facebook has been in negotiations to purchase a 10% stake in Jio. With analysts estimating Jio’s worth at around $60 billion, the deal would presumably be in the region of $6 billion.

India is a rapidly growing market and one which is increasingly important for Facebook; the country is estimated to the most Facebook users of any other country, with 400 million users of Facebook’s internet chat service WhatsApp. However, the Indian government is cracking down on the position of the US tech players in the country, restricting their presence and proposing a Personal Data Protection Bill. For Facebook, a partner like Reliance Jio could offer them a crucial foothold in an increasingly closed market.

For Reliance Jio, the deal would go some way to reducing its significant debt, which it is seeking to eliminate by March 2021. Last year, Reliance Jio chairman Mukesh Ambani announced that the company was looking to take on new “strategic partners” in order to achieve this goal and interest appears to have been significant. Microsoft is already working with Jio to provide cloud computing services and the Financial Times anonymous sources also suggested that Google was engaged in talks with the operator.

For now at least, all of these potential deals seem to have been delayed due to the coronavirus pandemic, with travel bans impacting the negotiation process. With India in lockdown for 21 days at the very least, it seems unlikely anything will be finalised until next month at the earliest.

 

Also in the news:
NTT Docomo to fire up 5G in March before SoftBank
5G’s potential shines amidst COVID-19 pandemic
SoftBank in $41bn push to buy back shares

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