Will SoftBank's Monopoly in Asian Ridesharing affect Uber?


(Brandon Bhangoo) #1

The latest round of investment that Uber is hoping to seal comes from SoftBank, a Japanese investment company that seems to be positioning itself as a monopoly holder of Asian ridesharing companies. It has its hands in Grab, Didi Chuxing and Ola, all of which are Uber rivals in Asia. However, this looks more like an investment concept that will position SoftBank as Asia's leading ridesharing investor as well as in a very good global position for when driverless cars come onto the scene.

On November 12th Uber stated to the media that it was hoping to close a $1 billion investment deal with SoftBank and Dragoneer that would both inject much sought-after capital into the company as well as help buy back shares from private investors and employees to the value of $9 billion, and thereby giving SoftBank a 17% stake in Uber.

This new investment opportunity provides Uber with the cash to continue and gives SoftBank access to a global ridesharing giant with 56% of the US market as well as large percentages around the globe. Uber is also in Asia with sites in the following cities;

East Asia South Asia Southeast Asia
Hong Kong Incheon Kaohsiung Kyotango Macau Seoul Taichung Taipei Tokyo Yokohama Ahmedabad Ajmer Bangalore Bhopal Bhubaneswar Chandigarh Chennai Coimbatore Colombo Delhi NCR Dhaka Faisalabad Gujranwala Guwahati Hyderabad, Pakistan Indore Islamabad JaipurJodhpur Karachi Kochi Kolkata Lahore Lucknow Ludhiana Mangalore Mumbai Mysore Nagpur Nashik Pune Surat Thiruvananthapuram Udaipur Vadodara Visakhapatnam Bali Bali kpapan Bandung Bangkok Batu Pahat Cebu Chiang Mai Chiang Rai Cirebon Danang Hanoi Ho Chi Minh CityIpohJakartaJohor BahruKhon KaenKota KinabaluKuala LumpurKuala Terengganu Kuantan Kuching Lampung Makassar Malang Manado Manila Medan Melaka Nha Trang Palembang Pampanga Pattaya Pekanbaru Penang Phnom Penh Pontianak Sandakan Semarang Singapore Surabaya Surakarta Yangon Yogyakarta

SoftBank founder Masayoshi Son has a vision of the future of driving, and that is future where artificial intelligence and interconnected devices manage all transportation.

A source close to Grab, a Singapore based rideshare company stated that SoftBank's role would change once it has become a major investor in Uber with a board seat. They will change the nature of negotiations between rival companies in the area.

Uber's market value is situated around $68 billion before the SoftBank deal, and the company is set on a course for an IPO in 2019. The SoftBank deal will open up many new challenging markets to Uber including the digital currency market.

Any future deals between Uber and rival companies will be similar to the one that Uber and Didi made in 2016, where Uber invested in Didi and then removed itself from the Chinese market, allowing Didi freedom of movement to maximize income.

Uber's CEO Dara Khosrowshahi stated in a recent New York Times DealBook conference that the Asian markets are over-capitalized, while Uber does have a major presence, and offers a much better service with access to better technology and experience. He stated, " we have a competitor, and we're spending the same amount on incentives, we tend to gain share because our product, or brand, or services are just better." He continued to stress that as far as he is concerned the markets in Asia are not going to be profitable in the near future.

The future of Uber in Asia is yet to be determined, at the moment it seems that Uber will continue to expand its influence and increase investment in the area, the changing nature of the population spread around key sites such as India and the Philippines shows a continuing source of cheap labor with an ever-growing middle class.

Having stated the above, Uber might consider closing down their Southeast Asian presence after the SoftBank deal in preparation for their IPO in 2019. It is imperative to present a more efficient money wise company, closing down cost centers and concentrating on reducing expenditure and raising profits. Uber has bee losing ridiculous amounts of cash and even this year they continue to post heavy losses that include a $645 million loss for the second quarter of 2017.

Golden Gate Ventures, a venture capital firm with investments in over 30 firms all over Asia also presented an opinion set by founding partner Vinnie Lauria, stating that he believes that after the SoftBank deal goes through Uber will pull out and sell their local operations to either Grab or Didi. While Grab is the largest ridesharing company in the Philippines, Singapore, Malaysia, Thailand, and Vietnam, it is outranked in Indonesia by Go-Jek.

Uber has been suffering recently in Asia with a lot of executives abandoning the company in the face of many government and regulatory problems in Indonesia, Malaysia, Vietnam, and India. Uber faces a stiff challenge in the area, with over 650 million potential customers, the cultural and socio-economic factors have kept sustainability out of Uber's grasp. Only last week Uber's chief of policy resigned, which took a blow to their credibility to improve relations with the Indian government.

With all the problems facing Uber, Grab has strengthened its position by expanding its focus from ridesharing to digital payment solutions and will continue to redefine its corporate identity with the financing it received from SoftBank and Didi.

Our Take: The SoftBank deal will lead to Uber consolidating its business in the area, bringing in much sought-after cash streamlining the oversized company and allowing it to concentrate on reaching a profitable performance model. It will also allow Uber to concentrate on its autonomous driving project which stands foremost in Softbank's reason for investment.


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