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Opinion

The importance of the Jio-Facebook agreement | HT Editorial – Editorials

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Facebook’s investment of Rs 43.574 crore in Jio Platforms (a wholly owned subsidiary of Reliance Industries) for a 10% stake reaffirms two axioms about valuations in technology and telecommunications. One, which is old, is that access is important. Jio, with 388 million subscribers in the latest count, has it at bay: it is the window to the world for 388 million Indians (and because we know that their data-rich network is used by entire families in some cases, probably much more) . ) The second axiom, which is new, is that the digitization rate has been accelerated by coronavirus disease (Covid-19); As a corollary, even entities (companies, government departments, utilities) that thought they had already digitized their operations to a large extent are discovering how trapped key parts of their processes are in the physical world.

This presents a great business opportunity for both of you. In comments after the announcement of the Jio deal, Facebook’s Mark Zuckerberg spoke of the presence of “more than 60 million small businesses in India” and helping businesses create new opportunities. There is already talk that WhatsApp, owned by Facebook, and Reliance Retail could partner, creating a combination of an online and offline model. For Reliance, the deal makes a lot of financial sense. Rs 15,000 crore go to Jio platforms, which will use the money to grow; the rest, around Rs 28,000 crore, will be used by the company to redeem some of the optional convertible bonds that parent Reliance Industries owns. Reliance will use the money to withdraw part of its substantial debt of more than 1.53 lakh crore. The deal will also help Reliance in its goal of increasing the revenues of its retail and telecommunications businesses to 50% of its total revenues in a few years, from 32% today. And it can help Facebook, which has had a series of clashes with the Indian government, to better navigate the regulatory environment.

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