Recently, the Social media giant Facebook has bought a 9.9% Stake in Jio. Jio is the telecom wing of the Reliance industries limited (RIL). This deal, worth $5.7 billion will help Facebook to gain a foothold in the growing Indian market. Reliance will benefit too, as this move will help reduce a significant part of their debts.
Benefits of the Parties
The Deal stands at a remarkable 43,574 Crores. This will allow Facebook to have an observer and also a seat in the board meetings of Jio. Further, it will help Jio to be a zero net-debt company to some extent, which Mukesh Ambani had proposed last year. The aforementioned investment was one of the biggest in India’s technology space.
The regulatory norms of India have troubled Facebook in the past. But this deal will enable them to take a giant step towards WhatsApp Pay, which was in the pipeline for a long time.
What lies next?
Reliance Jio revolutionized the Indian Telecom market. It provided the internet at a very low price. As a result, it was able to give the veteran giants like Airtel, Vodafone, a run for their money.
This deal adds a significant increment in our Foreign reserves. Hence, commercially, it makes sense. Further, Jio has the biggest customer base in India. Approximately 400 million people use Facebook in India. Leveraging the above, Reliance can expand Jiomart, using the technical capabilities of Facebook.
Before this deal, Jio had an estimated 40,000 crores of debt. This merger will help in reducing that debt to some extent. This will also strengthen the debt administration at Reliance.
This deal will also benefit the Kirana stores. Both the companies, with their user-base will be able to connect thousands of these stores. This will benefit the customers, as they wouldn’t have to go out and place orders.
WhatsApp and Jio Mart: A new player?
The integration of JioMart through WhatsApp will benefit 3 crore Kirana shops. Mukesh Ambani believes that this commitment will transform India digitally.
Under the deal, Jio will receive 15,000 crore Rupees. If this amount goes to JioMart, then Amazon, and Flipkart will face tough competition. With their huge consumer base, there is no reason why Jio shouldn’t give a fight to the likes of Amazon. What Amazon currently lacks is enough data to curate the contents like Jio.
After this deal, WhatsApp has the potential to become a super App. People will be able to buy and place orders of groceries through it. Further, if payment services through WhatsApp become a reality, it will compete with apps like Google pay and PhonePe. The enforceability of the above depends on NPCI and RBI authorization.
Facebook will earn the majority of its revenues from advertisements. But this will only be their short-term gains. Currently, they are only venturing into groceries. There is nothing to stop them from venturing into fashion, lifestyle, etc in the future.
Further, WhatsApp has a user base of 400 million. This merger will enable Jio to get access to that same consumer base. This will be a significant boost to JioMart. There is no doubt that their business will increase.
Through this deal, Facebook can also check India’s business and technological ecosystem. Facebook has a plan of rolling out this product in India very soon. This will again be subject to the authorization of the National Payments Corporation of India (NPCI). Though Facebook has denied a link, we cannot write off such possibilities.
In the past, Facebook has had regulatory problems in India; this deal will allow them to test the waters. Using this experience, they can get ready for WhatsApp pay.
After the recent change of India’s FDI policy, it is tougher for Chinese Companies to invest in India. This will mean Facebook is getting ahead of Alibaba in this race.
Privacy: A Concern?
As mentioned earlier, both Facebook and Jio have a high customer base. Using that, there is a plan to integrate JioMart into WhatsApp. But that would mean sharing a large amount of personal data of the consumers.
India currently doesn’t have a proper data protection legislation. So, both the companies needn’t follow any statutory authority in this regard. How they want to use the data will depend completely on their own privacy policies. Facebook may create a profile of the customers by observing their browsing histories. Then it may share that data with JioMart. Finally, that data can be used to provide their users with suggestions on what to buy.
A Nine-Judge bench of the Supreme Court back in 2017 ruled that the Right to Privacy is a Fundamental Right. But it is not treated as such in India. It gets the treatment of a public asset. Hence, there remains a possibility that both parties will share sensitive data.
India’s lack of an effective data protection law leaves scope for mismanagement. Both Facebook and Jio are market leaders in their own fields. The expectation that they will use the data of the consumers responsibly, is not too much to ask for.
Problem with Competition Policies
Reliance’s entry into the telecom domain drove many service providers out of business. The main reason behind this was their cheap price. Now Jio boasts of the largest consumer base in India’s telecommunication sector. Facebook is in that elite club too. They are the undisputed giants of the social media sector. The possibility remains that both Facebook and Jio will try to cut small players from the market. They can do so by asserting their dominance.
There lies no doubt that through this deal, Kirana shops will benefit a lot. But there are many red flags, which are a matter of concern. In the modern world, data is as important as currency and hence, deserves a wall of protection. As India doesn’t have any data protection legislation in place, there may be exploitation. Facebook has a past record of flouting domestic laws while conducting their business. We can only hope that this time, it will be in consonance with the law.
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