Softbank Decides Uber’s Market

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(Bick Bhangoo) #1

SoftBank held 15% of Uber and invested $9.3 billion, making it Uber’s largest single investor and savior. One of SoftBank’s nominated Uber Board Director, Rajeev Misra told Uber executives that Uber’s profitability would be better reached if Uber concentrates on the US and European market. Misran stated that SoftBank did not view Uber as a failing company, Uber will lose billions, but it is a growth company, so cutting losses is not the issue, concentrating on growth in the future for Uber. This means that the Uber moto “everywhere for everyone” will have to change.

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One of the reasons that SoftBank supports the decision to cut out unprofitable countries is because Uber has not maximized its holdings in the more lucrative ones. Rather the spreading themselves thin, Uber should concentrate on increasing their income and solidifying their presence in core countries, such as the US, Canada, UK and other European countries. Also, concentrating on Australia, Latin, and South America.

This sentiment does not come as a surprise since Uber’s presence in Asia has suffered some setbacks including a losing battle to China’s Didi Xuching, and competing with India’s Ola. The Asian market is saturated with three major contenders, and Uber is not welcome as a fourth. The Russian market fared the same; Uber merged its company presence there with Russian telecom giant Yandex. However, Uber has not really lost its presence in Asia, since the deal is set with Didi left Uber holding a percentage of Didi stock.

We should also consider that SoftBank owns percentages in both Ola and Uber, the two major contenders in India, as well as holdings in Didi and Grab. SoftBank also holds 30% in Grab, so the Asian market is really a win-win situation for them. Directing Uber to leave the Asian market, consolidates control over this market and maximizes overall profitability.
What SoftBank, and Uber CEO, Dara Khosrowshahi want to reach is the 2019 IPO with maximum performance and efficient financial operation. This means that Uber must concentrate on cutting out all struggling markets and build up their strong market shares, bolstering income for the ride-share side. Uber has more than just ridesharing operations; it owns a door to door delivery operation called Uber Eats which is lucrative, as well as heavily investing in Autonomous Vehicle research and development, which seems to be the future for road logistics companies like Uber. In fact, one of the main reasons that SoftBank was attracted to Uber was for its deep investment in AV technology, including a deal where Volvo will supply Uber with 24,000 SUV’s for their AV platform.

Another challenge that faces Dara is rebuilding the executive and management teams of Uber, replacing the old corrupted personnel that led was led by Travis Kalanick, Uber’s founder, and former CEO, to all of its current court cases and challenges impeding growth rather than supporting it.

Ubers ride-share income increased in 2017 to $37 billion but also increased its losses. However, with such a large market share and revenue, the company should concentrate on consolidating its operations expenditure side. Uber driver income should be restructured so that all sides of the market, Uber, drivers, and customers will win. It is important to show an unimpeded growth factor to potential investors for the 2019 IPO.

One of the main reasons why SoftBank invested in Uber was due to the intense work of Rajeev Misra, like Arianna Huffington, one of Uber’s executives told reporters that “It was strategically essential for Uber to have SoftBank on the cap table in a significant way. The deal would not have happened without Rajeev being able to see all the big, strategic reasons why that deal was important for the whole ride-sharing industry, and not being stopped by the internal drama, but always being able to navigate beyond it.”

The deal would not have happened if Kalanick had not released he stranglehold on decision making, as a major shareholder he could have dismantled any possible deal. However, after the deal with SoftBank was signed, Kalanick sold $1.4 billion of his holdings, so he did cash out part of his holdings in perfect style, as well as decreasing the ratio of shares held by the earlier investors in favor of SoftBank.

Bottom line; Uber now has a new CEO, a new Executive Board, and a new vision to reach a successful IPO, consolidate markets, concentrate on streamlining operations and restructuring its rideshare business model to maximize driver incentives without impacting on profitability. They must also increase UberEats as well as push their AV development forward.


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