Is Uber selling its Southeast Asia business to Grab?

If you read the tech press, you might have seen reports that Uber is pursuing a sale in Southeast Asia that would see Grab, its Singapore-headquartered rival valued at $6 billion, acquire Uber’s business in the region.

Rumors of such a tie-in have been rife for a while. Uber sold its China business in exactly such an arrangement in 2016, and it made a similar exit from Russia last year. In both cases, the firm’s motivation was to purportedly shape up for a potential IPO by offloading loss-making units that had lost the local market.

Why not, then, extend that into Southeast Asia and sell to Grab?

There is competition.

Reliable data is hard to come by, but it is fairly widely accepted that Uber, once the leader in Southeast Asia, has dropped behind Grab across the region as a whole, while both companies trial local startup Go-Jek — a unicorn itself, too — in Indonesia, the only market Go-Jek operates in.

There are challenges.

Despite a cumulative population that exceeds six billion people, Southeast Asia’s ride-sharing business did just $5.1 billion last year, according to estimates from a report authored by Google and investment firm Temasek. Uber is not expected to be profitable in the region “in the near future,” CEO Dara Khosrowshahi said last year.

There is the motivation.

Uber and Grab share a common investor in SoftBank. The Japanese firm first backed Grab back in 2014, and it recently pumped in $2 billion in fresh capital alongside China’s Didi Chuxing — the company that bought Uber China and, by virtue of that deal, is also an Uber stockholder. SoftBank, of course, secured a much-publicized investment in Uber in January.

Pitting two of its portfolio together in a loss-making market probably doesn’t make sense to SoftBank at this point.

Someone, somewhere, seems very keen to make a deal happen, and so we have the reports.

Last week, CNBC cited two people “with knowledge of the matter” who said that Uber “is preparing to sell Southeast Asia unit to Grab.”

The news was widely re-reported by a number of other media. But if you skip down to the second line of the original CNBC article, the transaction seems less definitive that the title suggests.

“No deal has been reached yet, and the timing of any such deal is uncertain,” CNBC reporter Alex Sherman wrote.

Uber and Grab both declined to comment on the report when we asked.

The Grab office in Singapore

The deal can make sense in financial terms, as above, but in practice there are certainly some question marks.

Uber may have fallen behind Grab, but it still has the brand. Uber invented ride-hailing, and it can continue to maintain a sizable market share, if not close the gap with some investment.

The word Uber is already a verb to many people, such is the company’s profile, and that isn’t just limited to the English language. There’s a huge amount of consumer awareness that Uber trades on, even when its competitors push hard with discounts, marketing and other strategies, is very much alive in Southeast Asia.

The market in the region is tipped to grow massively.

The same Google-Temasek report noted that the ride-hailing market in Southeast Asia has grown four-fold since 2015 and it is tipped to reach $20.1 billion by 2025. More generally, Southeast Asia is now the world’s third-largest region for internet users — with more people online than the entire U.S. population — with upwards of 3.8 million people coming online for the first time each month.

It might be hasty for Uber to retreat at this time. Certainly, the chips are down and things have been better, but the game is far from won as it was in China, where Uber had little mainstream recognition and was spending over $1 billion just to try to keep up with Didi.

There hasn’t been much of a reaction to the reports from Uber, but this week Khosrowshahi — who was in India as part of his first Asia tour with Uber — made a series of bullish comments that seemed to reaffirm a commitment to Southeast Asia, according to Reuters.

“We expect to lose money in Southeast Asia and expect to invest aggressively in terms of marketing, subsidies etc,” Khosrowshahi told reporters in New Delhi, adding there is huge potential in the region thanks to a big population and fast internet user growth.

You could, of course, offer a counter argument that Khosrowshahi is playing hard to get or making negotiations with Grab tougher. But the Uber CEO also pointed out to press that Uber is just one shareholder and thus its aims and objective don’t represent the path that the company will take.

From Reuters again:

Khosrowshahi said SoftBank is an investor but Uber, which has a valuation of around $68 billion, will take any final decisions along with the board on mergers and partnerships.

There has certainly been some suspicion that the leaks may be coming from the investor side of Uber/Grab, given the benefits that consolidation might bring. The fact that these leaks have also intensified since SoftBank became interested in an Uber investment, certainly gives credence to that theory.

Indeed, SoftBank board member Rajeev Misra — who joined the Uber board following the investment — told the Financial Times that Uber should focus on Western markets and cut its losses in emerging regions.

Is SoftBank the source of these new leaks? You can draw your own conclusions.

So, while a deal might make some sense on paper, reports of an imminent acquisition seem wide of the mark. That said, this is the ride-hailing industry, and anything can happen.

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Uber CEO plans to ‘invest aggressively’ to compete with rivals Southeast Asia

Uber CEO Dara Khosrowshahi has distanced the company from reports that it might exit Southeast Asia and India.

Currently in India on his maiden visit to Asia as Uber boss, Khosrowshahi told an audience that the company plans to continue to invest in Southeast Asia, where Uber has slipped behind Grab and Indonesia-based Go-Jek.

“We expect to lose money in Southeast Asia and expect to invest aggressively in terms of marketing, subsidies etc,” Khosrowshahi told reporters, according to Reuters. “From a competitive standpoint we think we can improve.”

“Right now the plan for Southeast Asia is to go forward, lean forward and to invest,” he added.

Last week, a CNBC report suggested Uber was planning to offload its loss-making Southeast Asia business to rival Grab, which is valued at $6 billion and also counts SoftBank as an investor.

There has also been speculation of a deal between Ola, which SoftBank has also invested in, and Uber. The Uber CEO denied having M&A plans in India but said it is “fun to speculate about.”

Khosrowshahi has previously spoken of challenging economics in Southeast Asia — where ride-sharing revenues are estimated at $5.1 billion last year and Uber is not profitable — but he said that the company “should actively be investing” in regions where there’s growth potential, such as Asia and Latin America.

Southeast Asia certainly has potential. A recent Google-Temasek report noted that the ride-hailing market in the region has grown four-fold since 2015 and it is tipped to reach $20.1 billion by 2025. More generally, Southeast Asia is now the world’s third-largest region for internet users — with more people online than the entire U.S. population — with upwards of 3.8 million people coming online for the first time each month.

India, meanwhile, is already a key market. Today it accounts for over 10 percent of Uber’s ride volumes but it is not yet profitable, according to Khosrowshahi.

“The greatest value that we can create here is to continue to invest and grow our business here, not just for India but the role it is going to play in shaping our product for the rest of the world,” he said.

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Uber officially launches Uber Express POOL, a new twist on shared rides

Uber has launched Uber Express POOL officially after a lengthy trial period that kicked off in San Francisco last November, and has until now remained available only in that market. Starting today, it’s coming to DC, LA, Miami, Philadelphia, San Diego and Denver, and more cities will be added over the next few weeks and months across the U.S.

The Express POOL launch brings a change to the current Uber POOL model that’s designed to make for more direct routing, with easier pickups for drivers and fewer annoying deviations from the route for riders thanks to two key actions Uber is asking riders to help out with: Walking and waiting. Basically, when riders hail an Uber Express POOL, they’ll be asked to wait a few minutes prior to the trip’s start, and/or walk to a nearby pick up spot, or from a nearby drop off point, in order to help optimize the route in as straight a line as possible along a path that can work for a number of different riders.

The Express POOL option will live right alongside the standard, existing POOL option that’s there right now in the app, at least for the foreseeable future, and riders can have the choice. But ultimately, Uber thinks that many riders will prefer opting to walk a bit and wait a bit, since the goal is to ultimately save everyone involved time and frustration.

Some of the big challenges around making POOL work as designed to provide the lowest cost option of Uber’s various tiers to the most people possible have been around intelligent routing. The challenge of handling predictions of when and where people will be, along with building routes that not only work from an efficiency perspective, but also from the perspective of serving real humans in a way that doesn’t leave them frustrated or confused, proved to be a massive one.

Uber’s intent with POOL is to help lower the cost of entry to its product to make it the massive base of the ride hailing pyramid that can reach the most people thanks to affordability near on par with public transit. While it accounts for around 20 percent of rides in markets where it’s available, based on a rough average, that’s still not obviously the majority, and so it’s hoping that tweaks to the product that provide a better overall experience will help increase its general appeal.

Uber parks its service in Morocco

Uber is pulling the brakes on its service in Morocco, which will cease on February 23, as it waits for local regulators to accommodate app-based ride-hailing.

The company announced the move on its country blog yesterday, writing that it has “not had any clarity” on how its service can be integrated into the existing transport model since it launched in the market three years ago.

“[T]he current regulatory uncertainty does not allow us to provide a safe and reliable experience that meets the requirements of our customers, both drivers and passengers. So, as long as there is no real reform and an environment conducive to new mobility solutions, we are forced to suspend our operations this week,” it writes. 

It does not explain why it took three years to decide to stop operating if doing so was unsafe.

Uber says it has 300 drivers using its app in the market and “nearly 19,000 regular users”. It adds that it remains committed to returning to the market “as soon as new rules are in place”.

It’s also going to be providing some financial assistance for drivers — to help them through what it calls “this difficult transition”. On this, an Uber spokesperson told us: “We are providing drivers with an estimate of revenues generated over two weeks of driving with Uber.”

Last year the company announced a similar pause on its service in Finland, but in that case it’s awaiting a specific law to be passed deregulating its taxi industry this year.

It also parked its UberPop p2p ride-hailing service in Norway, leaving only licensed driver services operating there — saying it wanted to engage in a “constructive dialogue with policymakers” to lobby for rule changes that would enable it to restart its engines. But without a firm restart date.

Such moves are in marked contrast to the Travis Kalanick ‘foot to the metal’ Uber era approach to regulatory roadblocks — which the company used to expand rapidly across the globe in its early years, exploiting the disconnect between new technologies and policymakers’ understand of them. Uber says its business now serves more than 15 trillion trips per day, globally.

But both Uber as a company, led now by emollient CEO Dara Khosrowshahi, and cities as an unaware playground for VC-fueled tech giants to do as they please have moved on and woken up to tech’s disruptive playbook. Now the game is all about honing a policy strategy.

“Since we launched in Morocco over two years ago, there has been a lack of clarity about new platforms like Uber and how they fit into the existing transport model,” Uber told Reuters in a statement. “Despite consistent dialogue… we have yet to see any constructive progress on the regulations and can safely say we have exhausted all measures.”

Uber’s p2p ride-hailing service remains shut out of multiple cities in several European markets, including Barcelona, Brussels, Frankfurt, Hamberg and Paris. It still operates some professions driver services in some cities where it has paused its p2p service.

In London the company lost its license to operate last year in a shock move by the city regulator, although it is continuing to operate during its appeal.

Last week London’s transport regulator published a safety-first vision for regulating the fast-changing private hire vehicle space. Uber has also recently announced a “safety” cap on driver hours in the UK, and has also been expanding subsidized insurance offerings in the region.

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Sony Corp. to launch an AI-based taxi-hailing service in Japan

Sony Corporation said today that it will build an AI-based ride-hailing system in Japan in partnership with five taxi companies. The service will use artificial intelligence to manage taxi dispatches and forecast demand based on factors like weather, traffic and local events.

Sony’s announcement came just before Uber chief executive officer Dara Khosrowshahi, who is currently visiting Asia, said the company wants to form more partnerships with Japanese taxi companies. According to Bloomberg, Khosrowshahi, who joined Uber last August, said he believes Japan is an “incredibly opportunity,” but that the company’s previous approach “frankly didn’t work.”

Sony’s ride-hailing system will launch this spring in partnership with taxi companies Daiwa Motor Transportation, Hinomaru Kotsu, Kokusai Motorcars, Green Cab and Checker Cab Group. Sony’s services, including apps, will also be offered to other taxi operators in Japan. Due to regulations that require taxi drivers to hold special licenses, companies like Uber can’t offer ride-sharing services in Tokyo and other major Japanese cities (instead, Uber currently operates only in small, rural towns where there weren’t any taxi companies). As a result, ride-hailing apps in Japan match passengers with licensed taxis, instead of non-professional drivers.

Sony’s service will compete against another AI-based ride-hailing service created by app developer JapanTaxi and Toyota, which announced a partnership earlier this month. JapanTaxi says 60,000 taxis, or about one-fourth of taxis in Japan, are registered on its service, which it claims gives it the biggest marketshare among Japanese taxi-dispatch apps. Others rivals are Uber and Didi Chuxing, which are both invested in by Softbank. Each have already formed a partnership with cab company Daiichi Koutsu Sangyo. Khosrowshahi also said Uber will focus this year on expanding its presence in Japan.

Featured Image: Jerry Driendl

Uber, Google and other tech employees form Coalition of Black Excellence

When black employee resource groups from a variety of tech companies come together, black magic happens. More specifically, black excellence happens.

The Coalition of Black Excellence Week, spearheaded by Uber Litigation Counsel Angela Johnson in collaboration with black ERGs from over 40 tech companies like Facebook, Google, eBay, Lyft and Microsoft, kicks off this Monday in the San Francisco Yay (Bay) Area.

The idea for CBE Week came in part from Johnson’s experiences living in Washington D.C., and being able to attend events put on by the Congressional Black Caucus, she told me at Uber’s headquarters this week.

“When I moved out to the Bay Area, I really wished there were similar types of experiences for tech,” Johnson said. “And I thought if we could bring together different black ERGs, or diversity and inclusion committees, or people who were interested in some of the issues the black community is passionate about, a lot of positive change and impact could come from that.”

CBE Week entails a series of 14 events designed to promote black excellence, establish community among people of color and support non-profit organizations. Some of the events include Wise and Woke: Wellness for the Black Community, organized by Zendesk’s people of color ERG group, a viewing of “Hidden Figures” at Twilio, a moderated conversation with SuperPhone founder Ryan Leslie at Google and the Black Joy Parade in Oakland.

For the events that charge money, companies have committed to donating a portion of the proceeds to non-profit organizations like BUILD, Oakland Digital, Level Playing Field Institute and Yes We Code.

The event Uber’s black employee resource group, Uber Hue, is specifically spearheading is the CodeBlack Tech Gala, which will recognize leaders in the black community, like Blavity co-founder and CEO Morgan DeBaun and 500 Startups Partner Monique Woodard. Once the week wraps up, the plan is to hit the ground running for next year, Johnson said.

Uber is reportedly preparing to sell its Southeast Asian business to Grab

Uber is preparing to sell its Southeast Asian business to Grab in exchange for a stake in the Singaporean ride-sharing company that has a big presence in that region, according to a new report from CNBC.

This wouldn’t be an unfamiliar story for Uber, which was handily beaten by Didi in China before eventually caving and selling the company to the dominant ride-sharing startup in China. Uber sold its Chinese business to Didi in August 2016, which involved an equity deal. In that sense, Uber may be acknowledging where it’s getting beaten, and instead looking to pick up stakes in those companies as a hedge on its ability to expand globally. Should Didi — or Grab, in the case of this report — end up being bombshell successes, Uber would experience its own significant windfall and have some good news to report to its shareholders.

Uber CEO Dara Kosrowshahi said at the Goldman Sachs Internet and Technology conference this week that, if it wanted to be, Uber could be profitable — though it is heavily investing in emerging markets and new technology like autonomous driving. That means assessing which markets would be loss leaders as it looks for growth versus some of its better-performing markets. Uber is all over the globe, but it faces stiff competition in Southeast Asia from Grab (and, formerly, Didi in China). Kosrowshahi acknowledged that it made more sense to try to pick up stakes in the local ride-sharing companies like Didi and Russia’s Yandex.

“The amount we’re investing in developing markets is a significant negative but that’s an optional investment,” Kosrowshahi said. “We think it should be on and it’s gonna be on for a while. And the big bets, autonomous [driving and other bets], increase the negative. If someone says forget about all this stuff, all I want is the core and sell all the stuff, you’d have a business for a quarter was cash flow break even. I’m pretty darn confident we can turn the knobs to even on a full basis profitable if we wanted to, but you would sacrifice growth.”

Kosrowshahi’s job since joining has been to essentially try to rid Uber of its negative baggage and figure out a way to transform it into a business that will be ready to IPO sometime in 2019. It’s made the somewhat peculiar move of reporting some of its financial performance, which has shown heavy losses, though Kosrowshahi suggests that the company would be able to dial back its investments (like international expansion) to get those financials in order as it looks at an IPO. Uber is one of the largest privately held companies in the world, with its long cap table looking forward to a significant liquidity event — something Uber will have to set itself up for if it’s going to deliver.

We reached out to both Uber and Grab for comment and additional context, and will update the story when we hear back.

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