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By Newley Purnell 

Facebook Inc.'s $5.7 billion tie-up with an Indian mobile leader could create a new kind of animal in the world's biggest untapped digital market: a social media behemoth wedded to a mobile infrastructure titan -- both coveting e-commerce.

Now the two companies are expected to square off against some formidable online shopping rivals: Amazon.com Inc. and Walmart Inc., which have each invested billions in the South Asian market.

Facebook's deal, announced Tuesday, is its largest foreign investment, forging a partnership through a 9.99% stake in Indian telecommunications operator Jio Platforms Ltd. Facebook shares were up 5% Wednesday.

The Indian firm's subsidiary, Reliance Jio Infocomm Ltd., has upended India's mobile sector by spending billions to build a nationwide 4G network and offer dirt-cheap data plans, which hundreds of millions of poor Indians have used to enter the internet economy for the first time.

The union provides the heavily indebted Jio with not just cash, but also access to Facebook's expertise in reaching consumers and using their information to sell ads. It also brings Reliance closer to Facebook's WhatsApp, a ubiquitous platform for Indian consumers just getting online. India is WhatsApp's biggest market, with more than 400 million users.

Access to the platform could be a boon for Jio as it pushes forward with an ambitious plan to dominate e-commerce in the rural regions where most Indians live and it is trying to partner with millions of India's small mom-and-pop grocery stores. Consumers, for example, could use WhatsApp to purchase products from neighborhood shops, which Jio has been signing up via low-cost point-of-sale machines.

"E-commerce will happen in a very localized way" in rural India, said Tarun Pathak, an analyst with research firm Counterpoint. It will happen not on PCs but on inexpensive smartphones and, "The familiarity is there for WhatsApp," he said. "It makes sense."

Reliance can also tap Facebook's expertise in consumer products, on display not just in WhatsApp but in Facebook-owned Instagram and Facebook's own platform, as it builds out its new offerings in video and music, analysts say.

In return, Facebook gets not just a foothold into rural India, but a powerful local ally. Reliance Industries, Jio's parent, is controlled by India's richest man, Mukesh Ambani. Mr. Ambani's conglomerate has interests ranging from retail to natural resources, and his company is renowned for its clout with regulators and a countrywide network of managers that can roll out massive projects in highly-regulated industries.

"It's a partnership of Facebook's product and Reliance's distribution muscle and might," Jayanth Kolla, founder of research firm Convergence Catalyst, said of the deal. "Reliance has shown through Jio that it can penetrate the length of breadth of this country extremely fast, and Facebook has struggled to penetrate the long-tail, billion Indians," he said.

Facebook's attempt to provide a no-cost telecommunications service dubbed "Free Basics" was rejected by the Indian government in 2016, and it has been waiting since 2018 for permission to roll out a trial digital payments service for WhatsApp. New Delhi has also been increasingly hostile to foreign tech firms, tweaking rules in ways that benefit local players.

Mr. Ambani in a video message released Wednesday said the deal reflected the "combined power" of Jio's network and Facebook's "intimate relationship with the Indian people." He suggested that Reliance's push to get grocery stores online could be followed by efforts to connect small and medium-size businesses, students and teachers, health-care workers and more.

Small businesses "are the core of every economy and they need our support," Facebook Chief Executive Mark Zuckerberg said in a post on his personal Facebook page when the deal was announced.

Amazon is investing $5 billion to expand its India operations, and Walmart in 2018 acquired India's biggest homegrown e-commerce firm, Flipkart, for $16 billion.

While the Reliance group is one of India's largest retailers -- largely through a network of local and international brands it has bought -- it has yet to prove itself in e-commerce. However its popular mobile service as well as its affordable phones give it a powerful springboard onto the screen time of those new to the internet in India. Its streaming video service, JioTV, for example quickly became one of the most watched in India because it was part of the Jio ecosystem.

Forrester Research Inc. projects Indian e-commerce sales to more than double to $68.4 billion by 2022, from $26.9 billion in 2018. Roughly half of India's 1.3 billion have yet to get online, but they are expected to start transacting online when they do.

India is a promising market for internet companies such as Alphabet Inc.'s Google, which is a digital advertising powerhouse and built a special digital payments service for the country. The company's YouTube platform is hugely popular. Ride-hailing company Uber Technologies Inc. has been scrambling to lure riders and drivers, and Netflix Inc. and Spotify Technology SA are catering to Indian users.

Write to Newley Purnell at newley.purnell@wsj.com

(END) Dow Jones Newswires

April 22, 2020 10:58 ET (14:58 GMT)

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