Uber started with 3 cars in New York, in 2010. However, after a successful kickstart and a ferocious mount in its initial years, we’ve now seen rapid acquisitions of Uber in different nations by the domestic counterparts.
Is it time for it to wrap-up in India, too, after Russia, China, and South East Asian regions?
Restating Uber CEO Dara Khosrowshahi, ”I think five years hence we’ll still be in the Indian market. Who knows if it’s through a merger.”
Although there isn’t a clear indication of a merger, Ola spokesperson did comment that the company “is always actively looking for opportunities for expansion of its footprint.”
Softbank has provided inexplicit indications. Softbank is one of the major investors of Ola. Last year, it funded Uber too.
In its capacity, it also funded Grab, Uber’s rival car-hailing service provider in South East Asian regions. Since then, there was a buzz about Uber possibly pulling out of that market, brokered by SoftBank. A few days back, the speculation turned into fact when Uber sold its business to Grab, for a 27.5 percent stake in the business.
What’s more, a similar case took place in China, where Uber China’s rival was Didi Chuxing. Both fought incessantly for a higher market share. Ultimately, Uber settled for a 20 percent share in the combined firm, which later monetized to $35 billion.
With India being the third largest market for Uber after the US and Latin America, is such a huge merger really in talks, or is it just another rumor which should be left unheard?
Uber and Ola together take up about 95% of the Indian market. Such a huge merger between the two edging companies would sure benefit Ola, which, according to its last published financial records (for the year ending March 2016), is at a pre-tax loss of $355 million. It may as well benefit Uber India (depending on the stake in the future business and other statistics of the merger).
Yet, there are few who completely debar such an occurrence. Paula Mariwala from Stanford Angels says, “Both face the same issues and have come in the crosshairs of the government.”
On top of that, both companies have ample expanse to stretch out to their full potentials.
A hands-on controversy arises if at all the merger comes about, on who will be in control of the merged firm?
1. Ola argues that any deal would be an acquisition of Uber by Ola. As of December, based on app-downloads, it appears that Ola accounts for 56.2% of the car-hailing market, whereas Uber represents a 39.6% holding.
2. While Ola is present in 110 Indian cities, Uber is only present in 31.
However, the question daunts, what does it mean for the passengers?
After Ola acquired TaxiForSure in 2015, the Indian Taxi Services Market has essentially become a two-seater see-saw. The two companies have competed heavily through prices and driver-incentives. If Uber and Ola merge, the economic impact will be monopoly-like.
At present, I always compare the rates of Uber and Ola and take the cost-friendlier one to my destination. After the merger, there’ll be no two choices to swap between. The company will be in full discretion to charge as high a price as it wants to.
This is not just a theoretical opinion, either. After the acquisition of Uber China by Didi Chuxing, China’s official Xinhua news agency slammed the acclamations of unscrupulous price rise on Didi Chuxing.
Same goes for the employees. Earlier, the drivers could flock to the company that paid better. Now, they must settle.
While Rajeev Misra, a SoftBank director, firmly believes it would be judicious if Uber concentrates on its core market – US and Europe, a person in direct talks with Uber says that after the episodes of Didi Chuxing (China) and Yandex (Russia), the company has no plans of taking a minor stake in any future merger with global competitors, any more.
The deal, if closed, will end the tuff between Softbank’s two major portfolio companies. Judging by media reports, the companies are not too keen on a merger, but SoftBank sure is digging it in. With SoftBank playing the key, let’s hold on to see where this goes.
Image Sources: Google Images
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