Reliance Jio, Facebook Deal Might Affect Airtel And Vodafone-Idea Balance Sheet: Report

Reliance Jio has once again shocked the industry by announcing a lucrative deal with Facebook. There is no doubt that this will help Reliance Jio to improve its balance sheet. But, the deal is likely to affect Airtel and Vodafone-Idea.

"We expect this announcement will send shockwaves through the Indian telco industry. Up to now, Bharti and Vodafone Idea have been able to promote their openness as key differentiators versus Jio's more closed approach to digital services," the US-based Bernstein said.

The research firm said the deal is expected to have some impact on the sector. It said that the telecom sector is already under a lot of stress and debt of about Rs. 7 lakh crore, where both Airtel and Vodafone-Idea have to pay Rs. 90,000 crore to the Department of Telecommunication.

In fact, the firm intimated that Reliance Jio is likely to attract Airtel and Vodafone-Idea users after this deal. It believes that Jio might use the Whatsapp platform to get Airtel's and Vodafone-Idea users.

"The Facebook investment removes balance sheet risks and adds considerable optionality to retail, digital, and internet business segments," the US-based Bernstein said. For the unaware, Facebook has announced that it will purchase a 9.99 percent stake in Reliance Jio and planning to invest Rs. 4,783 crores. This announcement has also boosted the RIL shares. Besides, Jio and Facebook are expected to bring some new initiatives that will help trade in the country.

"Facebook investment will accelerate Jio's digital monetization drive, and the partnership will leverage WhatsApp for new commerce initiative," Credit Suisse was quoted by Economic Times. Adding to that "As of Dec 31, 2019, Jio's net debt for the group stands at Rs 1,531 billion. With Facebook's investment, this should put RIL on course to be net debt-free by March 2021."

Both Airtel and Vodafone-Idea are sitting on a huge debt. The quarter-on-quarter losses and this AGR debt have forced them to increase tariffs, which again is not good for them as they might lose customers in the coming days. However, the deal needs approval from the Competition Commission of India (CCI) and TRAI as they (Reliance Jio and Facebook) are data-driven firms, so there are chances that this will give them an advantage.

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