Vietnam Business Channel

Is Uber selling its Southeast Asia unit to Grab or are sales rumors just a PR ploy?


According to reports published on on Feb. 17thm, Uber is in discussions with Singapore’s Grab to sell its Southeast Asia business in exchange for a sizable stake in the company. The report by CNBC said that: “no deal has been reached yet, and the timing of any such deal is uncertain but the company wants to do a similar deal with Grab as it did with Didi in China.

Grab provides private car, motorbike, taxi and carpooling services in more than 100 cities across Southeast Asia. The company raised more than $2.5 billion from SoftBank and other investors in 2017 and claims to have a 95 % market share in taxi ride services.

For Uber, the move would mimic its strategy in China, where the company sold its ride-hailing operation to Didi Chuxing for 17.7% ownership. The objective of the sale to Grab is to help Uber reel in its costs in preparation for an IPO as soon as next year.

Dara Khosrowshahi, the CEO of Uber has focused his attention since he joined the company in August 2017, on cleaning up the company's battered reputation and instilling financial discipline to push toward profitability. Uber's losses in 2017 increased 61% to $4.5 billion.

A tie-up with Grab would also play into SoftBank's efforts to exert greater control over the global ride-sharing market. In January 2018, the Japanese tech conglomerate bought a 15 % stake in Uber by buying shares from existing investors. SoftBank also owns shares in Grab, Didi Chuxing, India's Ola and Brazil's 99, and has publicly expressed interest in buying shares in Lyft, Uber's main rival in the United States.

At the Goldman Sachs Technology and Internet Conference in early February, Khosrowshahi said that competing against local players is multiple markets was difficult and that while he believes the company has a better brand, technology and network that if the “only competitive advantage, or the only reason you can be in a market is because you can spend money, that's not exactly a reasonable proposition."

Reuters News reported in November 2016 that a SoftBank investment in Uber would make it possible for the company to consolidate many of its ride-hailing assets across Asia. An Uber investor said that shutting its Southeast Asia unit would allow the company to move forward with its plans for an IPO.

The strategy to sell Uber operations to Grab seemed to blow up on Feb. 22nd, when Khosrowshahi, speaking in New Delhi (India) said: “We expect to lose money in Southeast Asia and expect to invest aggressively in terms of marketing, subsidies, etc.,” He added that Southeast Asia has huge potential in the region because or large populations and fast internet user growth.

Khosrowshahi said that “From a competitive standpoint we think we can improve,” and that a decade from now he expects 80 percent of growth at Uber to be organic and some through acquisitions. “We will look at anything ... But right now the plan for Southeast Asia is to go forward, lean forward and to invest.”
Financial analysts were left to stare at their computers after Khosrowshahi’s remarks and its said that teams in both Grab and Uber who were negotiating terms of a deal are now in limbo pending clarification of Uber’s strategy.




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