Facebook Seals Biggest Deal Since WhatsApp With Ambani

Facebook Inc. will invest $5.7 billion in the digital assets controlled by Asia’s richest man, the U.S. social-networking giant’s biggest deal since the 2014 purchase of WhatsApp as it seeks a broader foothold in its biggest global market.

The U.S. company will buy about 10% of Jio Platforms, becoming the largest minority shareholder, Reliance Industries Ltd. said in a statement Wednesday. Separately, Facebook said the deal would bring together JioMart, an e-commerce venture of Mukesh Ambani and its WhatsApp platform to enable people to connect with businesses.

Shares of Reliance Industries jumped 10% on Wednesday in Mumbai, helping the Indian tycoon reclaim the title of Asia’s wealthiest person from Alibaba Group Holding Ltd. founder Jack Ma. The rally compares with the 2.4% gain in India’s benchmark S&P BSE Sensex index.

Jio Platforms, a wholly owned unit of Reliance Industries, brings together Jio’s digital apps, ecosystems and the wireless platform offered by telecommunications carrier, Reliance Jio Infocomm Ltd., under one umbrella, according to the Mumbai-based company. The deal values Jio Platforms at a pre-money enterprise value of about $66 billion, the Indian company said.

The partnership with Jio would allow Facebook Chief Executive Officer Mark Zuckerberg to step up his expansion in a country that is rapidly embracing online payment and e-commerce as more people get smartphones. Jio Infocomm burst onto the Indian wireless market about four years ago, quickly moving into a position of dominance by offering free plans and undercutting rivals. Working with Facebook would be a boost to the ambitions of Ambani, until recently the richest man in Asia, who has been remaking his energy conglomerate as India’s first titan of e-commerce.

Unusual Bet

It is an unusual bet for Facebook, which typically buys into media and online properties. It underscores the potential it sees in India, which unlike China is an open market with an exploding smartphone population. Facebook may benefit from a well-connected ally in the country, where its Whatsapp is trying to launch a payments service but has run afoul of regulators over fake news and privacy concerns.

“India is a special place for us,” Zuckerberg said in a video posted on Facebook. “We’re also committing to work together on some critical projects that we think are going to open up a lot of opportunities for commerce in India.”

Zuckerberg has long aimed to roll out a digital currency as well as tools that let users make payments and buy and sell products over the social network’s messaging services in India.

Alluring Market

With its half-billion internet users, the South Asian country is an alluring market for the world’s largest technology companies, including Amazon.com Inc., Apple Inc., Microsoft Corp. and Alphabet Inc.’s Google. In India, Facebook has about 250 million users, while WhatsApp has over 400 million.

While India will be a testing ground for WhatsApp payment services -- currently in pilot -- Zuckerberg is also separately looking at the market for his crypto-currency project called Libra. Zuckerberg has said that payments and commerce are a priority, representing a major business opportunity for the company moving forward.

For Ambani, 63, the deal with the technology giant comes as a boost at a time when his group is battling the impact of the coronavirus pandemic and a slump in demand for crude oil. He has also been seeking to reassure investors that he will honor a pledge to reduce the group’s net debt to zero.

Wallet Share

“The collaboration with Facebook will give Jio a significant advantage on product and technological fronts to keep competitiors miles away and grab a larger wallet share of consumers across domains -- telecom, payments, retail,” Himanshu Shah, an analyst at Dolat Capital Market Pvt. wrote in a research note.

The Indian company spent almost $50 billion -- mostly borrowings -- to build Jio Infocomm, the mobile carrier, leading to a net debt of more than $20 billion as of March 2019. In August, he told shareholders that he planned to sell a stake in Reliance Industries’ oil-and-chemicals division to Saudi Arabian Oil Co. as part of a road map to cut net debt to zero by March 2021.

With the Aramco negotiations dragging on for months, the global health crisis and the crash in oil prices have also raised doubts if that deal will be signed. As a result, shares of the Mumbai-based conglomerate plunged as much as 45% from their Dec. 19 record, before rebounding from their March 23 low.

After building a wireless carrier and a retail business, Ambani has said he plans to rope in “leading global partners” before initial public offerings as he readies an e-commerce business, called JioMart, which would rival Amazon and Walmart Inc. in the South Asian country.