Ride-hailing firm Uber Technologies Inc has agreed to sell its Southeast Asian business to bigger regional rival, Grab. The company, Grab was last valued at an estimated $6bn is said to be the United States Company’s second retreat from an Asian market. A shakeup in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based Softbank Group Corp’s Vision Fund made a multibillion dollar deal investment in Uber. “It was really a very independent decision by both companies”, Grab President Ming Maa told Reuters, adding that Softbank CEO Masayoshi Son was ‘highly supportive’.
Uber will take a27.5% stake in Singapore based Grab and Uber CEO Dara Khosrowshahi will join Grabs board. He said “It will help us double up on our plans for growth as we invest heavily in our products and technology”. The Competition Commission of Singapore (CCS) said it has the mandate to review whether any mergers will result in a substantial lessening of competition and to take action, but it has to receive a notification from the companies. For example, CCS can require the merger to be modified to prevent the substantial lessening of competition.
The deal will help Grab’s meal delivery service, which will now merge with Uber Eats, compete with Go-jek, a dominant player in Indonesia and the region’s biggest economy, and it has rapidly expanded beyond ride hailing to digital payments and food delivery on-demand cleaning and massage. Ride hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.
Uber is preparing for a potential initial public offering in 2019. It lost $4.5bn last year and is facing fierce competition as well as a regulatory crackdown in Europe. A source familiar with Uber strategies said the company was going to step up its battle with Ola in India, another competitive and costly market where rivals have heavily subsidized rides in an effort to gain market share. Uber has close to 60% of the market there by some estimates. India accounts for more than 10% of Ubers trips globally, but the company is not making money there yet. Southeast Asia was really difficult for Uber. In India that competition is not across so many different fronts.
Fiki Oluwayomi Samuel