As Uber seeks to cut its East Asian loses, it is confirmed that Grab the Southeast Asia ride-hailer, has been in talks with Uber to acquire the latter’s Southeast Asian operations as the company moves to tighten its grip on the rapidly growing shared transportation sector in the region, according to people familiar with the matter.
John Colley, of Warwick Business School, is a Professor of Practice in Strategy and a former MD of a FTSE 100 company, who researches M&A
John Colley said: “There is little doubt that Softbank are behind this rationalisation of the taxi hailing market. Softbank has taken substantial shareholding positions in Uber, Grab, Lyft, and Didi Chuxing which are all hemorrhaging cash in a battle for market share. Incentives to drivers and passengers are driving the pursuit of a ‘winner takes all’ strategy in markets across the globe.
“Uber is now under pressure to move towards making money for a 2019 IPO, which has been promised to shareholders. Losses in 2017 of $4.5Bn suggest there is a very long way to go first. Softbank has proposed that Uber retrench back to Europe and North America where it has large market shares and reasonable prospects of emerging as an eventual winner. In China, Russia and now South East Asia it has been out-flanked by local competition with better local knowledge and connections.
“Softbank is the real winner as another source of major losses in two of its investments will be eliminated in the merger. Expect fares to increase and driver pay to reduce as subsidies are withdrawn as the price wars come to an end. The key question is whether less competitive markets will encourage new challengers to emerge? Switching costs are low for both drivers and customers, and there is no proprietary technology. Higher fares may allow for more local competition to arrive. Even with this move Uber has a long way to go from losses of $4.5Bn to justify a price tag of $48Bn – the price at which Softbank made its investment in Uber.”
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24 September 2014