The times of social distancing that have already resulted in destruction of billions of wealth could be blamed for delay in a probable deal between Facebook and Reliance Jio.
The deal may have been valued at Rs 7,542 crores at today's forex rates if a report is to be believed.
The scheme of the probable deal involves Mark Zuckerberg's Facebook Inc negotiating for a ten percent stake in Mukesh Ambani's Reliance Jio. FinancialTimes revealed in a scoop that the two companies were closer to a deal. The report detailed two people with knowledge as revealing details of the deal. An unnamed insider is reported as saying that the negotiations reached until the final signing and could have been announced by the end of this month. But then, the Coronavirus struck.
The exact deal size is yet to be revealed but Facebook was keen on buying a ten percent stake in Jio valued at $60 billion by analysts at Bernstein. With that logic, the deal could be estimated at $6 billion.
Surprisingly, the scoop says that folks at Google also held separate discussions for a stake sale.
The report has piqued the interest of investors across US as well as India. Facebook Inc is listed on Nasdaq while Reliance Industries Limited, the stockholding company for Reliance Jio is listed on the Bombay Stock Exchange. Both stocks gained during Wednesday's trade after the report was announced but none of the regulators have sought an official response.
Ambanis and Zuckerberg have known each other. Their last collaboration - one with Reliance Communications did not end as planned. RCom, currently in bankrtupcy courts although found by Mukesh Ambani, had partnered with Facebook during the Free Basics campaign. India's top court ruled against Facebook in 2016. Since then, India has been reported as a key market for Facebook's growth.
A Jio stake could be Zuckerberg's ticket to approach policy-makers for Whatsapp Payments. The payments service has remained in a limbo with concerns around data security and sovereignty. A deal could also help stabilize sagging ad-revenues for the world's largest social platform. In a blog post, Facebook explained investors that sudden surge in Coronavirus led engagement may not be proportional to revenue. In fact, the company has claimed of a weakening in its ads business.
For Mukesh Ambani, the deal helps in realizing the ambition of making RIL zero-net free in 18 months. Ambani has already roped in Aramco into RIL in a bid to clear accumulated debts of at least Rs 2.87 lakh crores. In December last year, a Canadian trust reportedly bought 1.30 lakh towers of Jio at Rs 25,215 crores.
Will RIL give the thumbs-up to Zuckerberg's plan? Nothing is concrete for now, but we bet $6 billion or Rs 7,542 crores may appear small given RIL's weight in the telecom space. Be it the AGR fiasco or spectrum dues payments, Jio is well-settled for a long innings in India's telecom business. With the 21 day lockdown RIL's clout as a major connectivity service provider and grocery retailer is certain to be seen. There is a huge value add-on in joining the RIL bandwagon. And, Mr. Zuckerberg could very well look beyond RIL's 2019 statistics of 370.07 million subscribers. If not, Google certainly is listening to this one.