Construct of FB-Jio deal not meant to be exclusive: Facebook

Facebook and Jio will look to drive synergies and areas of collaboration but the mega deal does not mean that the two sides will not compete in the market, officials said on Wednesday.

"The construct of this collaboration is not meant to be exclusive," Ajit Mohan, Vice-president and Managing Director of Facebook India, told reporters via a concall after the US-based social media giant announced an investment of Rs 43,574 crore to buy a 9.99 percent stake in Jio Platforms.

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The two sides "genuinely believe" there are exciting opportunities to work together and broaden the avenue for economic expansion, with first focus on small businesses, Mohan said.

To a query on whether Facebook could also look at other partnerships on the retail side with companies, say, Amazon or Flipkart, Mohan said, "The platforms remain open... it is non-exclusive and it is not meant to keep anyone away."

Elaborating on the deal, Anshuman Thakur, Head of Strategy, Reliance Jio, said, "At this point, we have identified merchant, SME (small and medium enterprise) commerce as something we can collaborate and we can benefit from what WhatApp already does very well... We will similarly find areas where the skill sets may be more complementary but this investment or partnership does not mean that we will not compete in the market."

He added, "There will be things where we will be directly competing with each other also in the market, the entities are independent of each other in every respect."

The deal does not, in any way, amend or change business models for the companies, he said.

"We have our suite of products and services, the same way that Facebook has its own suite of products and services and we are going to make best use for our respective companies," Thakur added.

Facebook will get a seat on board on Jio Platform Ltd, the company it is investing in, along with an observer seat.

Once the investment comes in, Rs 15,000 crore will be retained in Jio Platforms Ltd while the rest will be used to redeem OCPS (optionally convertible preference shares) of Reliance Industries Ltd.

"In that sense, the entire amount does go to reduce debt of the Group... Jio Platforms Ltd has been valued at an enterprise value of Rs 4.62 lakh crore. The debt in the company is around Rs 40,000 crore. With this investment, Rs 15000 crore will be retained in the company and balance will be used to redeem OCPS investments of RIL in this company," he said.

The net debt of Jio Platforms will correspondingly reduce because of cash which is retained in the company, he pointed out.

The timing of the deal reaffirms Facebook's commitment to India and underlines its confidence in partnership with Jio, Mohan said.

The two companies have articulated the first major collaboration that involves WhatsApp and JioMart, essentially to help small businesses — about 60 million of them across the country — connect with their customers, help people locate stores and merchants, and locate their products.

The context of the current environment makes the value proposition of the partnership all the more compelling, he said.

"As India comes out of crisis, there is opportunity to open up new avenues for small businesses in ways that make it easier for them to connect with their end consumers...for consumers to find products easily. So collaboration between WhatsApp and Jio will explore that...our expectation is that we will continue to explore other areas," Mohan said.

Over next few weeks and months, the companies will share specific details, he said.

"One of the things, for instance, is we envision enabling people to browse availability of local shops or get answers from a business and ultimately be able to purchase the product within WhatsApp chat with the business. We are trying to make it easier for people and small businesses, those are the kind of construct, we are exploring," Mohan said.

After the COVID-19 scenario, there will be other areas that the two companies will work on, Thakur said adding "timing has been appropriate in our view".

"We will work on alignment of the product so that we can make it easy for consumers. The specifics we will have to work together, and you will see the product out there in the market sometime," he said.

To another question on whether there could be some level of integration with JioChat going forward, Mohan said, WhatsApp is part of family of apps of Facebook it will continue to be open, that can be leveraged as platform by multiple businesses and companies. This particular collaboration is not exclusive.