There is smoke, there is fire. Is there a deal?
If we look out on the ride-hailing horizon, there is a lot of smoke suggesting Uber is looking to sell its stake in Southeast Asia, with Grab being the buyer. A report in KR-Asia struck the flint at the end of January and over the weekend an article in CNBC blew the spark into a fire.
The narrative goes as such:
Uber is looking to turn a profit (or provide a roadmap whereby it seems plausible in the near future) ahead of an IPO. To do this, it needs to consolidate its markets and pull out of seemingly endless wars that don’t appear to have an end. Grab is hoping to take advantage and “defeat” one of its chief rivals in Southeast Asia.
According to TechCrunch, Uber’s new CEO Dara Khosrowshahi said that, despite losing US$4.5 billion in 2017, a lot of the losses could be controlled. One hypothetical money-suck that could be plugged is its investment in Southeast Asia.
If Uber sells to Grab, and takes a chunk of the company as it did with Didi Chuxing in China, it would help alleviate some of that that enormous US$4.5 billion number.
For Grab, the motivation for the sale is fairly obvious. The company would eliminate its top rival in most markets (outside of Indonesia) and would essentially become the only ride-hailing option in much of Southeast Asia.
That is why this rumour is so tantalising. It makes sense for both companies and also puts tech enthusiasts in the position of discussing the M-word.
Plus, for the nationalists out there, it is an example of a local company outgunning its well-funded Western rival and winning. What’s not to love?
While the sexiness of the story explains the fire, Uber and Grab are both culpable for the momentum it has gathered. Most people (myself included) believe the story but if it was outright false, or far earlier in the process than the reports suggest, neither company has done much to squash the rumours.
After the KR-Asia article, I did the basic outreach to both companies too see if they could solidify the news beyond anonymous sources. They denied to comment (as they did with the CNBC news).
Not commenting is different from a firm denial.
Sometimes, when reporters approach companies with information that is false, the blowback can be fierce. Even if nothing is close to being published, the fear of a journalist reporting a wrong piece of information often elicits a, shall we say, firm response.
In this case, for both Uber and Grab, the strategy is to simply not comment, which allows CNBC to trust its sources and move forward with the story.
It would be fairly easy to issue a statement claiming CNBC is just wrong. That has not happened, which leads people like me to think the reporters are on to something.
One important caveat
Readers should keep in mind the source of the information. This is not to suggest it is wrong, just that the people “in the know” may not have any control over the success or failure of the endeavour.
In his weekly Asia Tech Review newsletter, TechCrunch reporter Jon Russell suggested the information might be a strategic leak from investors hoping to push a consolidation agenda. This is a fairly common practice and is a good guess for the source of the news.
The theory would mean the deal is far from inevitable and could be an effort by investors to push for something that isn’t really in the pipeline.
For myself, I am stuck on the non-denial.
I have been on the receiving end of an investor leak except mine was more of a lie than a leak. As hinted at above, when I performed my follow-up duties, the denial was vicious.
Until Grab or Uber comes out with a firm denial, I am leaning towards thinking this rumour has legs.
The other winner
The other potential big winner is SoftBank.
Much of the focus has been on the SoftBank angle in Uber because the consolidation talks started to ramp-up after SoftBank took a 15 per cent stake in the company.
Less discussed is the fact that SoftBank also co-led a US$2 billion round in Grab, with the specific mission of fighting Uber.
So SoftBank has huge stakes in both sides of this war.
Just to spin this web a little bit tighter, Didi Chuxing also co-led that round in Grab — which gets complicated because part of the China deal involved Uber taking a chunk of Didi. Got a headache yet?
The point is, if Grab wins Southeast Asia and Uber successfully consolidates towards an IPO, SoftBank has just won a major victory. It would own major chunks in two ride-hailing companies that are both dominant to their own given market.
Plus, the larger of the two would suddenly be staring at a reasonable exit path.
If the deal happens, should consumers be happy?
In the short-term, probably not. Choice is always a consumers best friend and should Grab buy Uber, most consumers in Southeast Asia would temporarily loose any semblance of reasonable alternatives.
That being said, this might only be a temporary status because Go-Jek appears ready to leave Indonesia.
Grab has the infrastructure advantage in countries like Thailand and the Philippines, but it is reasonable to think Go-Jek could catch up fairly quickly. The company has brand awareness beyond Indonesia.
The final thought to consider is that Didi Chuxing is also leaving China. Should its venture in Mexico go smoothly, it might decide to turn its eyes closer to home. But, at this point that is all conjecture.
Temporarily, riders (and drivers) in Southeast Asia may be forced to become Grab-only patrons, but as we see in China, another competitor will inevitably emerge.
For startup people in Southeast Asia, even if nothing comes to pass, the potential sale of Uber is one of the more interesting rumours that has come around in awhile. It sparks the imagination and stirs interesting debate.
It also would be a huge moment in the region’s history.
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