Facebook is seeking to buy a multibillion-dollar stake in Reliance Jio, whose cut-price mobile internet service has attracted 370m Indians in just three years, according to two people with knowledge of the discussions.

Facebook was close to signing a preliminary deal for a 10 per cent share in the heavily indebted Jio, one person close to the negotiations said, although the timetable of a deal has been affected by the global lockdowns caused by the coronavirus outbreak.

If it proceeds, the deal would give Facebook a key foothold in the Indian market, where its WhatsApp chat service has 400m users and is about to launch a payments service.

Since launching Jio in 2016, Mukesh Ambani’s Reliance has emerged as the only Indian company capable of competing with US tech groups in the fast-growing Indian market, expanding from mobile telecoms into everything from home broadband to ecommerce. 

Analysts at Bernstein valued Jio at more than $60bn.

Google had also been engaged in separate talks with Reliance Jio, one of the people briefed on the discussions said. The talks come after Microsoft last year announced plans to partner with Jio to offer cloud computing to businesses.

India has emerged as a vital market for Facebook and its WhatsApp messaging platform. The number of internet users in India is expected to rise to about 850m in 2022, according to consultancy PwC, up from 450m in 2017. Facebook overall is now estimated to have more users in India than any other single country. 

Meanwhile, the country overtook the US last year to become the world’s second-largest smartphone market after China by unit shipments, according to Counterpoint Research, making it a high priority for Silicon Valley companies as well as their rivals in China.

However, the Indian market has become increasingly difficult for Silicon Valley companies to access, as the government has added restrictions to overseas businesses operating there, including with its proposed Personal Data Protection Bill.

A deal with Facebook was due to be announced later this month, coinciding with the end of the Indian financial year.

Reliance’s debt burden has swelled as it has expanded Jio, and the deal would form part of its plans to cut net debt to zero by March 2021. The company has also built the largest retail player in India as it makes an aggressive move into consumer-facing businesses.

In an attempt to reduce its debt pile, Reliance has sought to sell off stakes, including 20 per cent of its refining unit to Saudi Aramco, and a $3.3bn investment by Brookfield in its tower business.

Facebook has collaborated with Reliance Jio in the past, including on a digital literacy initiative last year. But the social network ran into trouble in India four years ago when the country’s telecoms regulator blocked its “Free Basics” app, which was an effort to provide free access to popular internet services including Wikipedia and weather forecasts as well as its own social networking apps.

Critics at the time accused Facebook and its Internet.org connectivity initiative of “digital colonialism”. 

Reliance announced last year that it would separate Jio out into a new company and attract new investors ahead of an eventual listing. Mr Ambani, India’s richest man, said at the time that the company had “received strong interest from potential strategic partners”.

Reliance and Google did not immediately respond to a request for comment. Facebook declined to comment.

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