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Uber to sell south-east Asia business to competitor Grab Uber to sell south-east Asia business to competitor Grab
(about 14 hours later)
Ride-hailing firm Uber has agreed to sell its south-east Asian business to bigger regional rival Grab, marking the US company’s second retreat from an Asian market. Uber is selling its south-east Asian ride-hailing and food delivery business to bigger regional rival Grab, as its seeks to cut losses ahead of a potential stock market flotation next year.
The deal is the industry’s first big consolidation in south-east Asia, home to about 640 million people, and puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet’s Google and China’s Tencent. The move marks the US company’s third major retreat overseas, following its exit from China in 2016 and Russia last year.
A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank’s Vision Fund made a multi-billion dollar investment in Uber. SoftBank also invested in Grab. Uber lost $4.5bn (£3.2bn) last year and is facing fierce competition at home and in Asia, as well as a regulatory crackdown in Europe. In November, the Uber chief executive, Dara Khosrowshahi, admitted that the Asian operations were not going to be “profitable any time soon”.
As part of the transaction, Uber will take a 27.5% stake in Singapore-based Grab and Uber’s CEO, Dara Khosrowshahi, will join Grab’s board. Explaining the deal with Grab, Khosrowshahi told employees in an email that was published on Uber’s blog: “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”
Corrine Png, who runs Singapore-based research firm Crucial Perspective, told the Guardian: “Uber is seeking an IPO but that might be delayed depending on whether Khosrowshahi is able to address Uber’s cash burn problem as well as countering rival Lyft’s renewed strength in the US.
“Uber has been expanding overaggressively and assumed that it would be able to outspend Yandex in Russia, Didi Chuxing in China and Grab in south-east Asia but it turns out that Uber’s rivals were equally well-resourced. Uber would have been better off simply investing in Yandex, Didi Chuxing and Grab from the start.”
She added that Uber’s problems had given Lyft the opportunity to gain market share in the US, which remains the world’s most lucrative market for ride-hailing and ride trip data – essential for Uber’s self-driving technology programme.
Uber counts the US, Australia, New Zealand and Latin America among its core markets – regions where it has more than 50% market share and is profitable or sees a path to profitability.
Png expects Uber to focus mostly on the US, India, Latin America and the UK – assuming its appeal against Transport for London’s ban is successful. However, she did not rule out the possibility of Uber exiting India in return for an equity stake in Ola.
India is another competitive and costly market where rivals have heavily subsidised rides in an effort to gain market share. Uber is estimated to control close to 60% of the market.
As part of the deal with Grab, Uber will take a 27.5% stake in the Singapore-based firm and Khosrowshahi will join Grab’s board. It is his first major sale since taking over from Travis Kalanick in September.
“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said.“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said.
For Grab, the deal is a boon for its meal-delivery service, which will now merge with Uber Eats. A more robust food service will give Grab an advantage over Go-Jek, according to a person close to Grab. Uber invested $700m in its south-east Asia business, compared with the $2bn it burned through in China before selling its operations there to Didi.
“It was really a very independent decision by both companies,” Grab’s president, Ming Maa, said, adding that SoftBank CEO Masayoshi Son was “highly supportive”. A shakeup in Asia’s fiercely competitive ride-hailing industry became likely in November when Japan’s SoftBank made a multibillion-dollar investment in Uber. SoftBank is also a major investor in several of Uber’s rivals, including Grab, Didi and Ola.
In addition to its stakes in Uber and Grab, SoftBank is also one of the main investors in several other big ride-hailing firms including China’s Didi Chuxing and India’s Ola.
Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.
Uber, which is preparing for a potential initial public offering in 2019, lost $4.5bn last year and is facing fierce competition at home and in Asia, as well as a regulatory crackdown in Europe.
Uber invested $700m in its south-east Asia business, less than the $2bn it burned through in China before ceding its operations there to Didi.
Uber anticipated making more deals with rivals, but said it had no plans for another sale in which it consolidates its operations in exchange for a minority stake in a rival.
“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind ... The answer is no,” Khosrowshahi said in a note to employees.
“One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”
A source familiar with Uber’s strategy said the company was going to step up its battle with Ola in India, another competitive and costly market where rivals have heavily subsidised rides in an effort to gain market share. Uber has close to 60% of the market there, by some estimates.
Uber’s two previous retreats, from China and Russia, happened under former CEO Travis Kalanick. The deal with Grab is the first operations sale by Khosrowshahi, who started in September.
Uber includes the US, Australia, New Zealand and Latin America among its core markets – regions where it has more than 50% market share and is profitable or sees a path to profitability.
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