The ride-hailing war in Southeast Asia took another turn when confirmation came in that Uber was selling its Southeast Asian operations to Grab in exchange of a 27.5% stake in the business in return.
As a result, Grab will become one of the dominant player in the region with an opportunity to expand aggressively beyond ride-hailing. We will cover about Grab's business model in future articles.
Image Credit: Rappler
This "Uber move" proves to be a good idea for the following reasons,
- Uber will be able to focus on its key markets, mostly United States and Europe. To some extent, Latin America and India.
- Yet to see how it will turn out for Uber in India where it competes head-on with Ola (A Softbank portfolio) - Perhaps, another merger?
- Minimize losses at scale, aiming for profitability, and thus prepare solid financials and metrics for potential IPO
- Uber claimed to have invested over USD 700 million in Southeast Asia to conquer market share and grow the business; through the acquisition of 27.5% of Grab, the paper value amounts to over USD 1.6 billion. This is a big financial win for Uber.
- In the long term as Grab generates profit through strategic pricing and generating revenue through new verticals, Uber's ownership will appreciate in value. Grab's current USD 6 billion valuation is proned to go up.
- In a similar manner, Uber's exits from China and Russia have been strategic moves to remain focus on key markets while simulatneously, and again, reduce losses from competing with other Softbank's portfolio companies.
We believe Uber's move is a sound strategy in anticipation for its IPO. And, the ride-hailing giant will be focusing on dominating its key markets.