WhatsApp with Facebook, Jio, and India?


By: Mary Jander

The recent flurry of investment in India’s Jio Platforms Ltd., led by Facebook’s purchase of a 9.99% stake for $5.7 billion, points to challenges presented by some emerging edge cloud opportunities.

A subsidiary of Reliance Industries Ltd., Jio Platforms dominates India’s wireless subscriber market through subsidiary Reliance Jio Infocomm Ltd., which boasts over 388 million subscribers. Reliance says Jio Infocomm could easily migrate its IP-based 4G LTE network to “5G, 6G and beyond.”

Facebook's stake in Jio triggered a flurry of copycat investment in the mobile provider this month: Silver Lake purchased a 1.15% stake for $746.8 million; Vista Equity Partners bought a 2.32% stake for $1.5 billion; and General Atlantic purchased a 1.34% claim for $870 million. And KKR has thrown in another $1.5 billion for a 2.32% stake.

This amounts to a $10.5 billion bet that cloud-based applications eventually powered by 5G are a goldmine for investors, even in the midst of COVID-19.

E-Commerce Is the Heart of Facebook-Jio

Facebook and other Jio stakeholders believe mobile e-commerce to be the biggest opportunity in India's mobile space. Building an online shopping app into WhatsApp, which is hugely popular in India, could unlock small business buyers outside the urban regions.

As 5G opens up, this enormous small-business segment is expected to fuel the most profitable portion of India's complex retail universe. This is where Facebook and Jio could soar.

The pieces are in place: Jio’s Reliance parent has a lucrative retail presence in India. Reliance Retail boasts thousands of brick-and-mortar shops selling everything from mobile phones to groceries throughout the nation.

One Reliance Retail subsidiary, JioMart, is staging to start online grocery delivery to Jio wireless subscribers, as a start toward a wider online offensive that incorporates a Facebook payment app.

Called WhatsApp Pay, Facebook's payment platform has been beta testing in India for the last two years. Rumors are the Jio deal will finally help bring WhatsApp Pay to market by the end of this month.

E-Commerce Competitors Align

The release of WhatsApp Pay won’t come a moment too soon. Online payment platforms are crucial to success in India’s e-commerce market. Here Google Pay dominates in India, along with PhonePe, an Indian company owned by Flipkart, which in turn is owned by Walmart. Also important is Paytm, an Indian company in which China’s Alibaba Group owns a 42% stake and Japan’s SoftBank another 20%.

On the cloud front, Facebook faces competition from Amazon, which has invested heavily in the nation's e-commerce efforts, including taking a 49% stake in mobile retailer Future Coupons late in 2019. Powered by its AWS cloud, Amazon also has focused on outreach to the hotspot of small-business customers outside India's cities.

A wild card is Jio’s relationship with Microsoft. Early this year, Microsoft inked a ten-year deal with Jio to construct cloud data centers closer to those small and medium-sized businesses on which so many e-commerce hopes are pinned. The role of Microsoft’s own e-commerce platform in the scheme isn’t clear.

Facebook's Many Hurdles in India

Clearly, Facebook's deal with Jio is only the start of a fight for a place in India's mobile e-commerce space. There have been regulatory issues. And Facebook now faces allegations that offering WhatsApp Pay to Jio subscribers gives it unfair advantage against its competition.

There are other complexities in the Indian e-commerce markety. Reliance chairman Mukesh Ambani told Donald Trump back in February 2020 that Jio Infocomm is the only network in the world that does not use Chinese components. It depends on Samsung instead. Would the simmering trade disputes between the U.S. and China lead competitors such as Alibaba to stir the regulatory pot on behalf of Paytm? And what happens when 5G ramps up?

Still, nearly all of the companies mentioned in this article have close ties in New Delhi. And Reliance is heavily leveraged, which is plenty of motivation to make the Facebook deal work. What emerges from it all will be not only interesting to India but to the cloud, 5G, and e-commerce markets worldwide.