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Facebook’s – WhatsApp Pay, made plausible by Mukesh Ambani’s Reliance Jio?

Over the years, Reliance Industries has found itself surrounded by allegations of favouritism by the Indian government.

Right from the year 2012, the then Congress-led UPA-I and UPA-II governments under Prime Minister Manmohan Singh unto the year 2020, led by Narendra Modi’s Government, Reliance Industries has made several headlines for being openly patronized and favouritism towards Mukesh Ambani’s Reliance Industries. 

Allegations of Favouritism toward Reliance Industries

  • 2012 – allegations levelled by Arvind Kejriwal and Prashant Bhushan – in award of KG-DWN-98/3 or KG-D6 block, under the New Exploration Licensing Policy (NELP)
  • 2014 – allegations made by Communist Party of India leader Gurudas Dasgupta that the central government had shown favor to Reliance Industries in the matter of gas exploration in the Krishna-Godavari Basin and pricing
  • 2016 – The Modi led government was accused of favoritism by Vodafone, Bharti Airtel, Idea Cellular, and others and had accused the Telecom Regulatory Authority of India (TRAI) of showing a pronounced bias towards Mukesh Ambani’s Reliance Jio, which had entered the market on a trial basis and promised to provide a slew of packaged services, including voice and data, at very high speeds.
  • 2016 – First, it has been alleged that the company obtained spectrum in an illegal manner from another firm, and thus the spectrum auction was rigged.
  • Secondly, claims were made that government policies were changed post-auction to allow Reliance Jio to use the 4G spectrum not merely for data transfer but also for voice services. By letting Reliance Jio get a license for data services at a cheaper rate and then converting it into one that includes voice telephony, the government created an uneven playing field. Hence, it caused a significant loss of revenue to the exchequer.
  • 2018 – Govt’s Alleged Favouritism Towards Reliance Jio Forced BSNL Employees to Go on Strike
  • 2020 – The Modi government was questioned on if it helped Reliance Industries to raise 53,000crore. Allegations that several significant changes in rules and regulations by the Indian government during the COVID-19 lockdown aided a rights issue of shares by Reliance Industries Limited.
  • Investments announced into Reliance Jio of Rs 43,574 crore by social media giant Facebook Inc. and Rs 22,620 crore by three US-based private equity firms (Vista Equity Partners, Silver Lake, and General Atlantic) 
  • Securities and Exchange Board of India (SEBI) and the Union Ministry of Corporate Affairs (MCA) announced crucial relaxations in the regulatory requirements for companies intending to conduct such a rights issue of shares.

History of WhatsApp

WhatsApp Messenger, or simply WhatsApp, is used the world over to send text and voice messages, make voice and video calls, and to share images, documents, user locations, and other media.

It is one of the most popular messaging platforms and, as of February 2020 data, has over 2 billion users worldwide. It has gone on to become the primary means of electronic communication in multiple countries and locations.

The client application was founded by WhatsApp Inc. of Mountain View, California.

Facebook acquired WhatsApp in February 2014 for approximately US$19.3 billion.

When Facebook acquired WhatsApp

On February 19, 2014, Facebook, in its largest acquisition to date, announced it was acquiring WhatsApp for US$19 billion. At the time, it was reckoned as the largest acquisition of a venture-backed company in history. 

Sequoia Capital received an approximate 5000% return on its initial investment. Facebook, which Allen & Co advised, paid $4 billion in cash, $12 billion in Facebook shares, and (advised by Morgan Stanley) an additional $3 billion in restricted stock units granted to WhatsApp’s founders Koum and Acton. 

However, days after the deal, WhatsApp users experienced a loss of service, leading to anger across social media.

Following the acquisition, a considerable number of users tried to move to other message services. Telegram claimed that it acquired 8 million new users; and Line, 2million.

WhatsApp Conquests and Successes

  • In August 2014, WhatsApp became the most globally popular messaging app, with more than 600 million users. 
  • In January 2015, WhatsApp had 700 million monthly users and over 30 billion messages every day.

In 2015, Forbes had predicted that between 2012 and 2018, the telecommunications industry would lose $386 billion because of OTT services like WhatsApp and Skype.

  • March – April 2015, Voice calls between two accounts were added to the app
  • By June 2016, the company’s blog reported that more than 100 million voice calls per day were being placed on WhatsApp
  • In January 2018, WhatsApp launched WhatsApp Business for small business use.
  • November 25, 2019, WhatsApp announced an investment of $250,000 into the start-up ecosystem through a partnership with Start-up India, where it would provide 500 start-up’s with Facebook ad credits of $500 each.

SMB and Enterprise platforms

Until 2017, WhatsApp was only for individual use between two smartphones. While this enabled businesses to communicate with customers, but not at scale. In September 2017, WhatsApp announced that it was building and testing two new tools for businesses.

  • A free WhatsApp Business app for small companies
  • An Enterprise Solution for larger companies with global customer bases, such as airlines, e-commerce retailers, and banks, who would be able to offer customer service and conversational commerce (e-commerce) via WhatsApp chat, using live agents or chatbots.
  • In October 2020, parent company Facebook announced the introduction of pricing tiers for services it offers via WhatsApp Business.

WhatsApp Pay introduced 

WhatsApp Pay was launched in February 2018 in India as part of a trial run. In a partnership with ICICI Bank, payments through WhatsApp were introduced to a million users. 

On February 7, 2020, the messaging app received NPCI’s approval to roll out its digital payment service in a phased manner. In the first phase, WhatsApp was to offer payment services to 10 million users in the country.

Facebook and Reliance Jio multibillion-dollar deal

In April 2020, Facebook announced a multibillion-dollar deal with Mukesh Ambani’s Reliance Jio and thus marked its entry into the Indian Markets.

It fulfilled Facebook’s long-pending formal entry into India’s telecom sector. Also, it catapulted Facebook as the biggest foreign investor in India’s technology space.

The deal made headlines with social media giant Facebook to invest ₹43,574 crores into Jio Platform, a unit of Reliance Industries, for a 9.99 percent stake.

The purchase of a nearly 10% stake in Reliance Industries’ digital business unit Jio Platforms brought one of the world’s largest Internet companies on the table with India’s largest telecom player. 

The $5.7-billion deal, which valued Reliance’s digital operations at around $66 billion, and pushed the Indian conglomerate ahead in its plans of deleveraging its balance sheet while accelerating the launch of its new commerce business

In a deal that put the pre-money enterprise value of Jio Platforms at ₹4.62 lakh crore, this multibillion-dollar deal made Facebook the largest minority shareholder in Jio Platforms Limited. 

India’s oil-retail-telecoms conglomerate Reliance Industries Limited (RIL) led Jio Platforms called it the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the Indian tech sector in a statement on April 22.

What did the deal mean for Reliance Industries?

Reliance Industries Chairman Mukesh Ambani had said back in August 2019, while addressing the company’s shareholders at the annual general meeting, that the group had prepared a roadmap for becoming a zero net-debt company within 18 months.

The Facebook deal significantly contributes to that plan by trimming about Rs 43,574 crore from Reliance Industries’ outstanding debt as of September 2019 of Rs 2.92 lakh crore. 

Allegations of favouritism by the Indian government’s towards Reliance Industries; are not new.

Through the years, the ruling governments have been accused of alleged favouritism and patronizing Reliance Industries. 

The issue of favouritism has been raised by International Companies and from within the Indian Industrial groups.

Meanwhile, on its part, Reliance continues to dodge the slew of questions and allegations. It carries on unhindered and towards the goals that it sets for itself.

 

 

 

 

 

 

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