BT BUZZ: Don't be naive! Reliance Jio-Facebook deal is a partnership of unequals

Days after the Reliance-Facebook deal announced Facebook's 9.99 per cent equity in Jio Platforms - the holding company of Reliance-Jio's digital initiatives - the details of the cryptic deal remain shrouded in mystery. Both sides have stayed tight-lipped since the announcement, giving rise to widespread conjecture and kite-flying. It's a free for all out there, almost hilarious at times!

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Western analysts and consultants already see an upper-hand for Facebook. It's unclear what gives them that impression. For 9.99 per cent equity, you get an investment, with a sniff of a collaboration or partnership; most definitely not dominance over an entrenched local partner.

Truly under-estimating the Gujarati brain, a JP Morgan report says, "The key expectation from investors is if WhatsApp becomes the new all-in Super App and allows for Jio and [Reliance] Retail to foray into various commerce initiatives leveraging WhatsApp as the Super App".

It comes from a mindset that presumes Facebook's dominance at everything it does-oblivious of a scenario where Facebook can be the lesser partner. Which it is, in this case.

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Some more kite-flying: Jio can utilise Facebook's ad platform. Jio will leverage Facebook's user analytics-powered targeted advertising. Or, that Reliance customers can make in-app purchases via Facebook or Instagram checkout. Well, these are commercial agreements that are possible even without an equity infusion? Facebook didn't need to spend $5.7 billion to get Reliance-Jio to advertise on its platform.

Another suggestion that Jio transactions are likely to be done exclusively via WhatsApp pay is equally far-fetched. Not just because WhatsApp Pay uses the universal UPI platform most e-tail players have integrated but also because transactions are already being conducted via the Jio Money platform.

Next, a whole lot of conjecture with a dash of guesswork: Jio and Reliance Retail have deep offline presence while WhatsApp is digital. It's synergistic.

Obvious guess work, isn't it? But how does the Facebook-WhatsApp deal change what Reliance Retail-Jio were already doing? They were onboarding SMEs and kiranas at a feverish pace. They will continue to do that. They were leveraging the Jio telecom customer base for retail business. They will continue to do so. A vast amount of WhatsApp's 400 million Indian users would already be among Jio's 388 million customers, Reliance Retail or Reliance's petroleum, petrochem or agri users. RIL would already have their database.

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Look at how both sides have started gingerly. JioMart has created a WhatsApp number.

Mind you, a WhatsApp number! Hasn't integrated WhatsApp into JioMart - at least not as yet.

Access to each other's servers? Ha Ha! Neither side will give a passport to each other's servers unless there is a merger, or significant cross-investments. Businesses have inbuilt resistance to collaborations. Unlike the minority stake in this case, France's Renault and Japan's Nissan have had significant equity holdings in each other for more than two decades. Yet, sharing trade secret is a No No. They continue to spar till this day.

Here's how the partnership works in an ongoing trial run in Navi Mumbai, Thane and Kalyan: Jio customers who are Whatsapp users (Jio network already knows them) get a message: "Welcome to JioMart - WhatsApp Order booking Service. We are currently accepting orders only for selected localities in Navi Mumbai, Thane and Kalyan. Orders placed by 5 pm everyday are likely to be available for pick up at your nearest JioMart Kirana within 48 hours." After filling basic details (like address and name), customers are directed to JioMart with 50,000 SKUs. Once the order is complete, it is directed to the kirana in the locality which fulfils the order, either via customer pick-up or delivery. Reliance has been on-boarding local kiranas aggressively to not just use them as last mile delivery but also to manage their inventory and accounting.

Fine print is: all cards are in Jio's basket. It can cut off order pipeline to WhatsApp at will.

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Joint AI and analytics? Banish the thought! You expect Facebook to share its multi-billion dollar secret sauce for 9.9 per cent equity?

Don't forget the big reality that just as Sun sets on the oil business, Jio Platforms is where Reliance group's multi-lakh crore future will be built. Reliance Chairman Mukesh Ambani announced the deal is aimed at using the troika of Reliance Retail, Reliance Jio and Facebook-WhatsApp to tap the potential of 6 crore MSMEs, 12 crore farmers and 3 crore kiranas.

Do not expect Ambanis to give away the future of Reliance industries on a platter to Facebook. The $5.7 billion cash pile though gives an opportunity for RIL to deleverage its balance sheet to some extent.

What's playing out is a game of Sumo wrestling! Two heavy-weights with big ambition to corner India's burgeoning e-commerce market are on the mat. One is at an obvious disadvantage. They're sizing up one another cautiously. Pushing and shoving to assess strengths and weaknesses and to gain ground, where possible. It's advantage RIL here.

Facebook-WhatsApp are yearning for Jio's SMB, kirana and agri business and customers. That business is on Jio platforms. It's WhatsApp that needs a foot in the door, not the other way round.

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Hence, the burden of making it work is on Facebook-WhatsApp. They will need to find synergies in Reliance's scheme of things and prod and goad its partner to yield ground. Every deal goes through its fair share of honey-mooning, tug-of-war - finally adjustments or divorce. At Reliance-FB, the honey-moon has just begun. This is an investment for now. Period! Layers of the deal are still in the works. Do not read too much into it until the relationship matures.

For the deal to work, tough negotiations are in order to even make it mutually beneficial in the long run. It's hard to make a partnership of unequals work in the long run. Unless, of course, one of the two is content playing the lesser partner. Who will that be?