April 24, 2020 12:11:07 am
On Wednesday, Reliance Industries and Facebook announced that the California-based social media giant will acquire a 9.99 per cent stake in Jio Platforms limited, the holding company of Reliance Jio, for $5.7 billion (Rs 43,574 crore). The deal which pegs the value of Jio platforms at Rs 4.62 lakh crore will help the Reliance group to reduce its debt burden, something the oil-to-telecom conglomerate has been actively working towards. The two companies expect to benefit from the synergies created by partnerships between the various arms of Reliance — retail and telecom — and Facebook’s platforms such as WhatsApp. At its core, the idea is to create an ecosystem around JioMart, enabling customers to access the local kirana stores using WhatsApp, combining both offline and online retail. This ability to connect millions of local businesses with end consumers, and provide them a seamless online transaction experience could radically alter the country’s retail landscape.
Both firms have stressed on the new opportunities for businesses of all sizes, and especially for the millions of small businesses across the country. With the ongoing lockdown in the country only reaffirming the importance of the local kirana store — major online delivery channels have struggled to reach consumers during this period — integration is bound to be an enticing proposition. A scaling up of this model will also provide opportunities for cross-selling — significantly increasing the upside for firms and increasing the valuation of its retail arms. At present, though, the reach of WhatsApp Pay is limited — just over a million Indians are reported to currently have access to the pay feature. But this sort of model is popular in other Asian economies such as China, Korea and Japan where apps like WeChat have a wide range of product offerings, which induces consumer stickiness. This arrangement also allows Jio to greatly expand its product offering to its more than 370 million-odd subscriber base. The deal may also open up the entire WhatsApp consumer base — the near ubiquitous chatting app has a consumer base of around 400 million — to Reliance, including those on other telecom platforms such as Airtel and Vodafone.
Yet there are concerns regarding this arrangement. For one, given the dominant market position of the players, concerns over the market structure and its implications for consumer welfare are bound to arise. Second, the tie-up also raises questions on net neutrality with the possibility of preferential treatment being granted. Third, given the data privacy issues highlighted in the past by the Cambridge Analytica episode, for instance, there are apprehensions over the enormous amounts of data that will be collected by these entities, especially when India still does not have a personal data protection law.
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