Reliance Industries has announced Facebook will invest roughly $5.7 billion for a 9.9% stake in its telecoms and tech business unit.

Facebook is an internet company which is still overly reliant on a direct correlation between userbase and revenue growth, and India is a market with a substantial number of unconnected individuals. As one of the fastest growing telecoms and technology businesses in the second most populous country in the world, this is a smart bet.

If $5.7 billion is table stakes to get involved in the Indian market, it could be viewed as a fair price for Facebook to grow its userbase from roughly 300,000. With an estimated population of 819 million aged between 15-64, there is massive potential for growth for the social media giant.

And as a disruptive, fast-growing telco, with side-bets in smartphones, IOT devices, cloud, edge computing, AI, big data and healthcare, Reliance Jio certainly has the ambition which could match Facebook.

* Omdia World Information Series

** Telecom Regulatory Authority of India data

In the press materials, Reliance Jio has stated the focus will be India’s 60 million micro, small and medium businesses, 120 million farmers and 30 million small merchants, suggesting WhatsApp could play a significant role. As a country which lacks wide-spread traditional banking facilities, alternative digital payment platforms are a hotbed of potential.

While Google, Apple, Tencent and numerous others are already eyeing this opportunity, this tie-up with Reliance Jio could provide a material advantage. For example, as part of the partnership Jio Platforms, Reliance Retail and WhatsApp will enter into a commercial partnership agreement to further accelerate the JioMart platform. This direct link to existing Jio customers is a very attractive proposition for the WhatsApp enterprise team.

“When Reliance launched Jio in 2016, we were driven by the dream of India’s Digital Sarvodaya – India’s Inclusive Digital Rise to improve the quality of life of every single Indian and to propel India as the world’s leading Digital Society,” said Mukesh Ambani, Chairman and MD of Reliance Industries.

“All of us at Reliance are therefore humbled by the opportunity to welcome Facebook as our long-term partner in continuing to grow and transform the digital ecosystem of India for the benefit of all Indians.”

As an investment, this transaction fits in perfectly with the overarching Facebook mission to ensure more individuals are brought into the digital society.

While Reliance Jio is a mainstay of the telecoms fraternity nowadays, it wasn’t long ago it was a major disruption to the Indian telco industry, offering radically reduced data tariffs to the masses. It democratised connectivity for Indian consumers, set against a backdrop which had become a very stagnant industry. Like investments in the Telecom Infra Project (TIP), the Libra digital currency and Peruvian telco Internet para Todos Perú (IpT Peru), the objective for Facebook is to bring connectivity to more people.

The TIP mission is to commoditise network infrastructure to bring down the price of deploying equipment in developing markets and rural environments, while the Libra stablecoin creates an entry point to the digital economy for those who lack traditional banking facilities, and IpT Peru is bringing the internet to unconnected communities with OpenRAN infrastructure. Reliance Jio is another company which is helping to connect the unconnected, but why should Facebook care so much?

Facebook investor relations (revenues in millions USD – $)

Although Facebook has been attempting to diversify its revenue streams, the majority is still attributable to the core advertising business. This is a unit which relies on the userbase; there are only so many ads which can be served to an individual before the experience is impacted. To ensure revenues grow but users are not irritated by an overly commercialised platforms, new users need to be attracted to the platform.

In the developed markets, Facebook is reaching saturation point. It will have to add additional services in these markets to continue growing revenues, as well as attract users to the platform in the developing markets.

The financial growth which Facebook has demonstrated year-on-year is quite remarkable, though this is largely due to the core advertising business. The social media giant has largely failed to drive into new markets, with many acquisitions still waiting to pay dividends. The $16 billion WhatsApp acquisition is certainly one, but with the Reliance Jio partnership there is an opportunity to add a greater enterprise and payments venture into the mix.

Although the primary mission is most likely to expand the userbase for the core social media platform, the ambitious nature of Reliance Jio and embryonic stage of the Indian digital economy offers Facebook a significant opportunity to develop new ventures. This is a market which could act as an incubator for the diversification Facebook has been attempting for years.