Uber is preparing for an initial public offering (IPO) in 2019. To achieve a successful IPO, the company will need to improve its financial standing. As a step in that direction, the company is preparing to sell its South-East Asian business to Singapore’s Grab. Per the terms of the deal, Uber will gain a sizeable share in Grab.
Grab provides private car, motorbike, taxi, and carpooling services in more than 100 cities across Southeast Asia. The company claimed holdings of 95% when it announced plans to raise over $2.5 billion from SoftBank and other investors in 2017. SoftBank also owns shares in Grab, Didi, India’s Ola and Brazil’s 99, and has publicly expressed interest in Lyft, Uber’s main U.S. rival.
Since taking a the helm of the highest valued private company in the world, Dara Khosrowhsahi has been on a mission to repair Uber’s damaged reputation, fix all wrongs, and improve financials. This sale is likely a means to that end.
Asia, while posing as a very lucrative market, has been very tough on Uber. Regional and local competitors have forced Uber to bring on their A-Game. In China, Uber swapped its operations with competitor Didi Chuxing for an ownership stake in 2016. In India, the taxi platform Ola stole 3% of the market from Uber just in the second half of 2017, despite Uber’s major push to win there.
Ola now leads in market share by more than 15%.
At the Goldman Sachs Technology and Internet Conference in San Francisco this week, Khosrowshahi said that competing against local players is very hard.
“I think the team ran through an inventory of where we competed, and if we compete on let’s say even on a dollar-for-dollar basis against the local player, paying the same amount to drivers, collecting the same amount from riders, in general where we are now is, if both players are kind of spending equally we tend to win share. We’ve got a better brand, we’ve got better technology, and better network. Whatever it is, we tend to win share. There’s certain markets, China and Russia, where that wasn’t true. And if your only competitive advantage, or the only reason you can be in a market is because you can spend money, that’s not exactly a reasonable proposition.”
Whether or not this move will benefit Uber in its IPO remains to be seen.
