The business world is reeling from Grab’s purchase of Uber’s Southeast Asian business. The stakes are high: Grab is battling to become the de facto mobile platform in the region, and this struggle will shape the regional economy for years to come. Here, I tease out the winners and losers in this gigantic chess move.
Grab comes out looking good. Not many people can say, “I’ve beaten a Silicon Valley giant.” As I’ve mentioned in a previous article, the consolidation allows Grab to focus its efforts on battling other competitors.
Loser: Grab’s competitors
It’s now or never for Go-Jek, Grab’s Indonesian rival whose success is so far confined to its country of origin. It’s the same story for food-delivery rivals Honestbee, Foodpanda, and Deliveroo, who find themselves suddenly facing a monster with unlimited resources.
Grab is set to collide with the tech giants of the world for dominance in Southeast Asia. Sea is investing heavily in its ecommerce app Shopee and payments solution AirPay. Amazon expanded to Singapore but hasn’t hinted at a game plan for the region. Alibaba is doubling down on Southeast Asia by overhauling Lazada, whose new boss previously ran Ant Financial.
In an ideal world, this is not the outcome Uber wanted. But at least in terms of pure dollars and cents, it’s set to reap a profit. In an email to employees, Uber CEO Dara Khosrowshahi explained that the company invested US$700 million in the region but now has a 27.5 percent stake in Grab that is worth billions. If Grab continues to do well, Uber could benefit even more.
Loser: Consumers and drivers
Consumers seem skeptical. Grab’s app experience seems to pale compared to Uber’s. As subsidies wind down and Grab enjoys its monopoly position, its rides could become more expensive. While this may not happen in the end, it’s a sentiment Grab will have to fight.
Meanwhile, some Uber drivers are lost and confused about the merger, Todayreported. Attempts by some drivers to contact Lion City Rentals, the car rental firm owned by Uber, went unanswered. The future of these drivers seems murky too. Fewer subsidies could mean that either drivers receive less income, or consumers pay more for rides which affect demand and hurt drivers.
“Uber has sent out messages with specific sign up details to all their drivers in Singapore. Grab will be reaching out to drivers in the coming days to ensure they have everything they need to transition over to Grab,”a spokesperson told Tech in Asia.
SoftBank got the outcome it wanted. As an investor in both Grab and Uber, it’s no longer in the awkward position of backing both rivals. With Grab and Uber focused on winning their respective home markets, SoftBank can maximize its returns.
Loser: Some of Uber Southeast Asia’s employees
Consolidation between firms lead to greater efficiency, but that inevitably results in staff attrition. Lazada lost hundreds of employees when Alibaba took control. Grab will offer new roles to all 500-plus affected Uber staff, who are now on paid leave. “On the part of Grab, we are committed to try and find everyone a home at Grab,” the spokesman said.
However, some may not find the eventual offers attractive. There’s also the C-word: culture. There’s no guarantee that the combined teams will gel.
Winner: Southeast Asia’s startup ecosystem
Grab’s success will fuel more investments into startups in Singapore and the region. For starters, Grab’s early investors, like 500 Startups, Vertex Ventures, and GGV Capital, will have reaped their rewards and bolster their case for investing even more money in the region’s startups.
Likewise, Grab’s founding team and early employees would profit handsomely from its rise, and some of that money would go towards angel investments. Some Grab alumni may start the next generation of tech companies.
Ultimately, Grab’s success proves that local players, given the right circumstances, can beat global giants.