Uber has agreed to sell its Southeast Asian operations to Singapore-based competitor Grab, signaling its departure from a key market. The sale includes Uber’s cab service and food delivery operations UberEats. Uber will hold a 27.5% stake in the combined business.
The deal is seen as a win for Grab against its rival Go-Jek as the former strengthens expansion efforts in the cab services market which is estimated to reach more than $20 billion over the next seven years. Grab offers services in several cities across countries such as Singapore, Malaysia, Indonesia and the Philippines.
The Uber app will function for two weeks while the UberEats app will run till May-end to enable a smooth transition for drivers. Uber said there would not be any layoffs due to the deal.
This move is seen as an effort by Uber to prepare for an initial public offering in 2019. The company is looking to improve profitability by taking disciplined financial steps while also revamping its image. Uber previously exited key markets in China and Russia by selling its operations to Didi Chuxing and Yandex respectively and by taking stakes in each of the businesses.
SoftBank, a major investor in Uber and Grab, is an advocate of consolidation while Uber itself has denied any consolidation strategies.
Uber intends to focus on fewer core markets, and its priorities are likely to be in Japan and India. Uber will continue to face stiff competition from Ola in India. Due to the exit from this key Asian market, there are speculations that Uber might lose footing in India. Uber has faced bad press in India before, and its Southeast Asian retreat could pave the way for Ola to move ahead in the race. Note that SoftBank also backs Ola.
Uber CEO Dara Khosrowshahi has stated that this deal will be the last of its kind, but it remains to be seen whether SoftBank’s plans for consolidation will prevail in the end. It also remains to be seen how this deal turns out for the cab services provider.