It’s not just about tapping into a growing digital market. Indian companies are expanding Western partnerships to keep China out.
Google Joins the Reliance Bandwagon
On Wednesday, Google announced it would invest $4.5 billion in India’s Jio Platforms, the unit of Reliance Industries overseeing music, movie, and telecommunications ventures. The investment, which buys Google a 7.7 percent stake in Jio and a seat on its board, is the latest in a spree of Western investments into Reliance’s digital company. Facebook bought a 9.99 percent stake worth $5.7 billion last month. Since April, Jio has raised more than $20 billion from investors including General Atlantic, Qualcomm, Intel, and Silver Lake. (For context, as TechCrunch reports, the entire Indian start-up world raised just $14.5 billion in 2019.)
What Reliance gains. Cash, of course. As I describe in my 2018 book India Connected (a new and updated paperback was released this month), Jio has transformed India’s digital market by pouring $30 billion into the country’s internet infrastructure, building a nationwide 4G network, and initially offering new customers unlimited data for free.
While India was already rapidly digitizing, Jio’s data offers were the catalyst for tens of millions of Indians to discover all that the internet had to offer. Even today, with Jio no longer offering free internet, India has among the lowest costs for data in the world. Jio’s investments are paying off, with the company’s valuation soaring to around $60 billion.
But this is about more than just dollars. Partnering with Google will enable Jio to draw on its expertise in smart homes, connected cars, and software. A potential low-cost 5G Jio smartphone could be powered by a bespoke version of Google’s Android system. Similarly, Jio’s partnership with Facebook could enable synergies through WhatsApp, allowing Reliance to dominate the digital money and e-commerce markets through local corner stores. (This would also hurt the Indian ambitions of Amazon and Walmart.)
What Google and Facebook gain. Reliance is well-known for its government connections and expertise in navigating local regulations. It is also expected to become the dominant national player in 5G, with a growing share of the total cellular market. And as other global markets are tapped out, India’s appeal is that it still has as many as half a billion people who haven’t come online. That’s 500 million potential new users of Google and Facebook’s products. Many of them will discover the internet through Jio’s data and soon its smartphones.
The China factor. The Indian national mood has shifted greatly in the last few months and in the wake of growing border tensions with China. Prime Minister Narendra Modi has urged “self-reliance”—code for shunning Chinese-made products, which currently dominate India’s smartphone ecosystem. Reliance was always going to be the biggest domestic winner in this scenario, which in part explains why Western firms are hitching a ride.
One significant impact of the investments may be in India’s eventual turn to 5G. Before recent India-China tensions, Huawei held ambitions of participating in India’s 5G trials and spectrum auctions. That is now unlikely. Instead, with its deep pockets, Jio looks set to buy a large portion of the airwaves and be among the first to deploy 5G-ready products for hundreds of millions of Indians.