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Straight Talk Consumer & Entertainment Services


Omdia view

Last week saw a number of reports indicating that Facebook is intending to purchase a 10% stake in Indian telco Reliance Jio. This investment is an interesting prospect: it presents a marked contrast to the kind of social acquisitions we saw in the 00s where social firms were the target of acquisitions by media firms.

Reliance Jio, the three-year old upstart of the Indian telco landscape, has seen astonishing growth since it launched and now reaches over 370 million subscribers. Indeed, after just three years Reliance Jio is the biggest telco in India.

Reliance Jio has a strong base in digital content offering movies, TV content, and music streaming apps to users. But its forays into physical products such as smartphones and VR headsets haven’t gone as well. Facebook would offer Reliance Jio a tech partner with real pedigree in developing and launching new products. Facebook has only rarely mis-stepped when launching tech – the Facebook phone of 2013 being the most notable example.

In Omdia’s view, Facebook still has a way to grow in India – in terms of monthly active users (MAU) and revenue – and this acquisition will help Facebook to drive that growth. But reaching those new users is proving difficult for Facebook. They’ve attempted to grow users in India several times over the past few years, most notably with Free Basics which was supposed to offer free access to key mobile apps on partner networks. However, the Indian government banned the project citing net neutrality regulations which meant that telcos had to treat all traffic the same regardless of origin.

Figure 1: A stake in Reliance Jio could enable even bigger growth for Facebook in IndiaA stake in Reliance Jio could enable even bigger growth for Facebook in India

Source: Omdia’s Social Media Forecast 2019–24

As well as wanting further growth in India, Facebook has been facing greater competition in India from the likes of TikTok and Bigo Live. A stake in Reliance Jio will bring Facebook closer to the Indian consumers who are getting access to the internet for the first time and more importantly, in rural areas, which it hasn’t been able to adequately reach yet.

Facebook has also invested in sports rights – it streams Spanish La Liga matches live in India, as has Reliance Jio. Both companies bid for Indian Premier League (IPL) cricket series rights. Neither company won but Facebook did place the highest bid for the Indian digital rights. The rights were won by a bid for global digital and TV rights from Star India which was larger than the sum of the winning bids for the individual rights buckets. However, the investment from Facebook could give Jio deeper pockets to bid for additional sports content even if the coveted IPL rights remain out of reach.

With a deep understanding of Indian consumers on one side and some of the best technological minds on the other there is no doubt that if the investment goes ahead – coronavirus may well have thrown a large wrench in the works – an alliance between Reliance Jio and Facebook will create an Indian digital powerhouse.

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