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Uber exits South East Asia, sells regional business to rival Grab

Ola uber

Uber has agreed to sell its South East Asian business to regional rival Grab both companies said in a statement on Monday. As part of the deal, Uber will get a 27.5% stake in Singapore-based Grab while Uber CEO Dara Khosrowshahi will join Grab’s board.

The deal will see Grab — which is valued at over $6 billion — buy up Uber’s ride-sharing business in eight countries in South East Asia. It will also take over Uber Eats, which is currently present in three, and expand that service across the region during the first half of this year.

The deal puts Grab in absolute control of South East Asia’s ride-sharing market, except Indonesia. Grab said that Uber’s ride-sharing app will be available for a further two weeks, while Uber Eats will close down and migrate to GrabFood at the end of May.

This is Uber’s second high profile exit from an Asian market, in August 2016 the company sold its Chinese operations to local rival Didi Chuxing. As part of the deal, Uber acquired 5.89% of the combined company while Didi obtained a minority equity interest in Uber.

Commenting on the Grab-Uber deal a TechCrunch report points out that the “deal starts to make sense when you consider that both companies share common investors — SoftBank and Didi and that waging an expensive subsidies war in what is currently a loss-making hurts both sides.”

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All eyes on India

Following its exits from China and South East Asia, all eyes have turned to what Uber will do in India its biggest market in the continent. Just like it did in China and South East Asia, Uber faces strong competition from a local rival, Ola. The other key factor is that Softbank (which owns 15% of Uber) is also an investor in Ola’s business. This has led to speculation on whether Uber will be merging its business in India with its main competitor.

On his recent trip to India, Uber CEO Dara Khosrowshahi discussing speculations about a possible merger with Ola said it was too early to comment. He said that Uber will be operational in the Indian market in five years’ time, whether that’s through a merger or not is impossible to tell now. He added that mergers and acquisitions are not a priority for him at the moment, as far as the Indian market is concerned.

Khosrowshahi mentioned that India is currently one Uber’s ‘healthiest markets in terms of growth rates.” He added that he expects the Indian market to be key to Uber’s position in the next 5-10 years. He informed that currently, the company has over 300,000 active drivers in India, and completes more than 10 million trips per week.

Following the announcement of the deal with Grab, Khosrowshahi told his employees that there will be no more exits under his leadership. He said,

It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind, from China to Russia and now Southeast Asia. The answer is no.

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. 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.”

Softbank and Uber

Late in December last year, SoftBank and its co-investors acquired 18% stake in Uber. As part of the deal, SoftBank got 15% percent of Uber’s shares, while other co-investors got just under 3% of the company.

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SoftBank and others also agreed to infuse $1.25 billion into the cab aggregator in new investment as part of the transaction.

Uber was valued at around $68.5 billion in 2016, but it dropped down to $48 billion in the SoftBank deal. There were multiple reasons attributed to the large slump in value. The ride-hailing company was plagued by a string of scandals, lawsuits, bans and fights throughout 2017.

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Writes about consumer technology, social media, digital services and tech policy. Is a gadget freak, gamer and Star Wars nerd.

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