A few weeks ago, reports from tech news sites including Tech Pilipinas indicated that Uber is selling its Southeast Asia operations to competitor Grab. This weekend, Uber announced the groundbreaking agreement. Uber will sell its ride-hailing operations to Grab in exchange for a 27.5% stake in Grab. The deal will also include Uber’s food delivery service, UberEats.
Under the agreement, Uber’s CEO Dara Khosrowshahi will join the Grab board.
The landmark deal sees Grab acquire almost absolute control of the Southeast Asian ride-hailing market, which is projected to reach over $20 billion in value by 2025. Grab has a dominant position in nearly every Southeast Asian country, except Indonesia, where GO-JEK, backed by Google and Tencent, is the market leader.
“We are humbled that a company born in Southeast Asia has built one of the largest platforms that millions of consumers use daily and provides income opportunities to over 5 million people. Today’s acquisition marks the beginning of a new era. The combined business is the leader in platform and cost efficiency in the region. Together with Uber, we are now in an even better position to fulfill our promise to outserve our customers. Their trust in us as a transport brand allows us to look towards the next step as a company: improving people’s lives through food, payments and financial services,” Grab CEO Anthony Tan said.
Uber CEO Dara Khosrowshahi said, “This deal is a testament to Uber’s exceptional growth across Southeast Asia over the last five years. It will help us double down on our plans for growth as we invest heavily in our products and technology to create the best customer experience on the planet. We’re excited to take this step with Anthony and his entire team at Grab, and look forward to Grab’s future in Southeast Asia.”
Grab is confident that the merger will have no issues with government authorities, although some believe that the deal will signal a monopoly of the regional ride-hailing market.
“Grab is committed to cooperating with local regulators in relation to the acquisition. Grab believes the acquisition will add to, among others, vibrant and competitive ride-hailing, delivery and transportation spaces, and it will make a merger notification to the Competition Commission of Singapore,” the company announced.
The development is a massive win for SoftBank, which holds stakes in both Uber and Grab. SoftBank also has shares in Ola, India’s largest ride-hailing company, as well as China’s top ride-hailing firm Didi Chuxing. The four companies combined provide more than 45 million rides a day, according to SoftBank’s figures.
Why Uber is Leaving Southeast Asia
Uber’s withdrawal from Southeast Asia is the company’s third retreat from a regional market. Uber recently left Russia in favor of Yandex last year while the company sold its Chinese operations to Didi Chuxing in 2016.
According to many reports, Uber is leaving Southeast Asia to focus on its core markets in North America, South America, Europe, and Australia. The company is also trying to cut back on losses in anticipation of its planned initial public offering (IPO) next year. Uber has already spent more than $10 billion in its battle for supremacy in the global ride-hailing market.
While Uber has succeeded in becoming the biggest company and brand in the ride-hailing economy, the company was plagued with internal problems, which led to the resignation of former CEO and co-founder Travis Kalanick. This allowed regional rivals like Grab to chip away at Uber’s market share and even take control of the market.
What Uber’s Withdrawal Means to the Philippines
With Uber’s impending withdrawal from the Southeast Asian market, many around the region and the Philippines are worried that the deal will usher in a monopoly that will not be good for ridesharing drivers and riders.
“Probably why the LTFRB will now issue a generic TNVS franchise instead of one specific to Uber or Grab. Riding public will be adversely affected as Grab usually has higher fares than Uber,” a Tech Pilipinas reader, RJ Nolasco, commented.
“As common with all mergers, the adverse effect will always be felt by the end user. In this case, the riding public. This merger lessens competition in the market, which means prices of fares will go up and service quality will go down. This is one of the reasons more and more people are buying their own vehicles; whether cars or motorcycles. Pseudo-transport monopolies such as this only contribute to the worsening traffic situation in the metro,” another commenter, Ian Maristela, said.
Whether the Uber-Grab merger will lead to better services and prices for customers – or a worsening situation for the ride-hailing public – remains to be seen. What we don’t know at the moment is how it will affect the hundreds of Uber drivers in the Philippines. Will they be offered the same compensation and benefits that they got from Uber once they move to Grab?
What do you think about this deal? Will this merger be good – or bad – for the ride-hailing economy and the riding public in the Philippines? Please share your thoughts below. Don’t forget to like us on Facebook or follow us on Twitter.
Sources: TechCrunch, Bloomberg