UBER withdraws to the investor spot in SE Asia while centering on organic growth in core markets

UBER announced last Monday the merger with the singaporean ride sharing company Grab,its local competitor in South East Asia.The western company combined its operations with those of Grab. In turn, UBER received a 27.5% in the combined company.

UBER driver in India. © UBER.

Grab now operates in eight countries in Southeast Asia: Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.The company offers over 10 diversified services in the transportation field, but needs for developing a payment service and in this field faces two giants such as Alibaba (Alipay) and Tencent (WeChat pay).

The merger with UBER also lets Grab focus in facing Go-Jek, a $5Bn start-up backed by Alphabet and Tencent, who is leading in its home market (Indonesia) where it has already launched the range of financial products and on-demand services that Grab is only just beginning to develop in this South East Asian market. Go-Jek is planning to expand to other countries starting from 2018, so that Grab is facing some more competition and not only in Indonesia.

The consolidation with Grab in South East Asia follows the sale of UBER’s operations to the Chinese ride-sharing service Didi-Chuxin in the PRC and the merger of its operations in Russia with its local competitor Yandex in 2017. A transaction, the latest, valued at 3.7Bn.

“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,” Uber CEO, Dara Khosrowshahi, explained in a letter to Uber staff, assuring that consolidation was not the new strategy of the company.

UBER’s journey in Southeast Asia started in Singapore almost five years ago and before the merger the company was operating in eight countries within this region:Singapore, Malaysia, Indonesia, the Philippines, Thailand, Vietnam, Cambodia and Myanmar.

“After investing $700 million in the region, we will hold a stake worth several billion dollars, and strategic ownership in what we believe will be the winner in an important global region,” Khosrowshahi underscored.And this without bearing the erosion that direct competition brings with.

Focus on organic growth and core markets, Khosrowshahi says

“This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t,” UBER’s CEO explained and assured that the company was not thinking about a new consolidation in the short term: “While M&A will always be an important value-creation tool for our company, going forward we will be focused on organic growth—growth that comes from building the best products, services and technology in the world, and re-building our brand into the mobility brand that riders, cities and drivers want to support and partner with.

Fierce competition by Ola Cabs, but troubles not only in India

While Khosrowshahi tells about a strategy of organic growth the fact is that UBER is facing a fierce competition in other Asian markets, specially in India. Leaving aside taxi drivers, the domestic ride sharing company Ola Cabs is currently leading its domestic market. More over, Ola has announced expansion to Austraila.

UBER driver in India. © UBER.

But there’s no doubt that the competition of local ride sharing companies is not the only big issue the Californina company is facing today. Specially after the Supreme Court of the European Union made clear that UBER operations in the field of the ride sharing services provided by not professional drivers had to be banned within the European Union unless the company operates under a professional transport lisense, complying with the requirements on safety, etc needed to obtain this kind of lisenses.

The mentioned UBER service has been forbidden in some EU cities such as Berlin, London (the withdrawal of the lisense has been appealed)or in countries like Spain. Last December, the Supreme Court of Madrid (Spain) ordered the Californian Company giving up operations in this country by illegal competition considerations.

Taking into account these facts, the consolidation in South East Asia, the sale in China and the merger in Russia come under a new light. Uber is forced to concentrate in changing its core business and evolve to new services, should the company keep growing its business, at least in one of its core markets, Europe.
In fact the company has entered Barcelona (Spain) with its Uber X version, served by professional drivers operating under transport lisense and has announced a new strategy partnering with the local Authorities in smart city developments.

Image over the headline.- Dara Khosrowshahi (CEO UBER). © UBER.

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