Uber-Grab Deal: Boon or Bane?

by Patrick Liew on March 28, 2018

Uber-Grab Deal: Boon or Bane?

Recently, a fake news that Temasek has made substantial losses when Uber sold its operation to Grab has gone viral.

Many have unwittingly believed in the fake news and shared it with their friends.

1. To put the record straight, a wholly-owned subsidiary of Temasek was an early investor of Grab.

Since then, Grab’s market capitalization should have increased.

2. From the news release, “Grab will integrate Uber’s ridesharing and food delivery business in the region into Grab’s existing multi-modal transportation and fintech platform.

“With the combined business, Grab will drive towards becoming the #1 online-to-offline (O2O) mobile platform in Southeast Asia and a major player in food delivery.”

Grab is poised to be a major contender for the Fintech market, starting with providing financial services through GrabPay and moving into providing micro-loans and insurance products.

The Uber-Grab deal will bode well for Temasek’s investment in Grab.

2. While there’s no detailed account of the size of the investment and details of the proposed Uber-Grab deal, Uber has not gone belly up.

Through the deal, Uber will own 27.5 % of Grab.

That share would translate to $1.6 billion as Grab was recently valued at $6 billion according to CB Insights.

Not a bad deal because Uber claimed to have invested about $700 million in Southeast Asia over the past five years.

3. As a result of the Uber-Grab deal, the two companies will not fight each other in the future and as a result, cause more losses.

There’ll be greater economy of scale, resulting in cost savings and improvement in efficiency.

4. Uber will be in a better position to focus on its strengths and in markets where it has dominance or can dominate in due time, including Japan and India.

5. Uber will also be able to clean up its balance sheet, expedite its plan to list the company, and potentially raise more funds to strengthen its growth.

6. According to Uber CEO Dara Khosrowshahi: “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.

“This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t.”

7. The Uber-Grab deal should bode well for both Uber and Grab and investors of both companies, including Temasek and GIC.

8. Moving forward, the Uber-Grab deal will open up new markets and opportunities for both companies.

9. In the words of columnist Christopher Tan, “The implications extend beyond the point-to-point transport industry. Card companies such as EZ Link and Nets should also be worried, as Grab’s GrabPay mobile payment platform grows in coverage.

“Ditto food delivery players. As well as the emerging fintech industry, which Grab has already dipped its toes into.

“Armed with powerful data garnered in the five years it has been a ride-hailing rival to Uber, Grab is poised to be a serious contender in the financial services arena. Its two-week-old venture with Japan’s Credit Saison to provide micro loans is just a start.

“In the words of a Grab insider, “our new businesses will be 100 times larger than ride-hailing”.”


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