The Jio-Facebook $5.7 Billion Deal- High stakes in Shallow Waters?

By - Paisafatafat Blog

  • 2020-04-24 12:20:59
  • Finance

The recent announcement of the Facebook and Jio deal has come at one of the most unsettling times in terms of economic volatility, making it rather incomprehensible and disconcerting at the same time. The initial incontrovertibility that came with the announcement about the positive trend it gave to the economy, has now been overshadowed with serious doubts.

Facebook and Jio had come into a smashing agreement wherein the former invested $5.7 billion for a nearly 10 per cent stake in Reliance Jio, making it the largest minority shareholder of Jio. It also makes the latter worth nearly $66 billion.

Legal experts say that the two companies could find themselves at loggerheads in policy debates mainly over policies relating to data collection, storage and means of sharing in India. They are both technology giants in their own rights but vastly differ in their bearings over these matters, say the experts.

On matters of providing access to private social media data to law enforcement authorities also, the two companies hold start opposite views. While Reliance on one hand hold an unambiguous stance that all data of citizens should be owned and controlled solely by Indians and not any foreign body. The American tech giant on the other hand has vehemently opposed the Centre’s demand that data of Indians ought to be stored locally. Moreover, given Facebook’s previous record over data privacy, Indian users should certainly be on the guard.

In 2019, in a communication with TRAI (Telecom Regulatory Authority of India), Jio stated that all OTT (over the top) platforms must hand over complete access to data to the country’s las enforcement authorities and this must include decryption keys as well. Facebook on the contrary differs in their views as is evident in WhatsApp’s resisting requests from the Government of India for tracing origin of messages and citing end to end encryption. They state it is in violation of user’s privacy.

So why the deal? Facebook CEO Mark Zuckerburg, in a video, mentioned several pointers for one to clue into the intent behind this investment. He mentioned that he was looking forward to huge opportunities for commerce in India and this was going to be one of the links to that end. He also mentioned in an official blog post on Facebook that one of the opportunities could be the “digitization of retail” in the post pandemic era.

Chairman and Managing Director of Reliance Industries Limited, Mukesh Ambani, also stated in one of his media addresses that both companies have been making efforts to prop up small and medium sized businesses for some years now. Reliance Jio has been making efforts to shore up “kirana” stores for quite some time now although without any definite plan of action. This deal, as per Ambani, will give the motive a much needed propulsion.

The deal has allowed Facebook to attain a meagre foothold in the Jio platform for its WhatsApp payment application by combining that with Jio’s marketplace app JioMart apart from its other retail offerings.

However, it is noteworthy here that while WhatsApp’s Pay is still at its nascent stage, Jio’s payment platform JioMoney is at a highly competitive position. On the other hand, WhatsApp in its own right, has approximately 400 million users in India which is certainly more than what the Jio subscribers amount to. This will face shareholders with a controversy as to whether Jio will back its own payment platform JioMoney or Whatsapp Pay.


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