PHILIPPINES
The Manila Times-Mar 28
The decision of California-based ride-hailing app Uber to exit the Philippines and the rest of Southeast Asia and sell out to rival Grab, may yet be the biggest test for local regulators.
The Philippine Competition Commission (PCC) must run a fine-toothed comb on the deal, which, analysts have warned, would leave commuters and drivers worse off.
Under the sale agreement, Uber gets a 27.5-percent stake and a board seat for Chief Executive Officer Dara Khosrowshahi in Singapore-based Grab.
Both companies have primed the Southeast Asian market for the buyout, floating a number of trial balloons, which were then followed by official denials.
To recall, Uber exited China in 2016, selling out to DiDi Chuxing, and merged with Yandex’s taxi-hailing app in Russia last year. The Southeast Asian buyout was only a matter of time.
The reason for Uber’s exit is clear. Uber is under tremendous pressure from shareholders, particularly Softbank of Japan, to produce profits ahead of its initial public offering in 2019.
A Softbank-led consortium sank money in Uber last year on the basis of a whopping $48-billion valuation, and naturally wants handsome returns. Uber, however, saw losses of $4.5 billion last year, nearly double the $2.5-billion shortfall recorded in 2016.
“There is little doubt that Softbank [is]behind this rationalization of the taxi hailing market. Softbank has taken substantial shareholding positions in Uber, Grab, Lyft, and Didi Chuxing, which are all hemorrhaging cash in a battle for market share,” merger analyst John Colley of Warwick Business School said in a statement sent to The Manila Times.
Were customers and drivers farthest from the minds of Grab and Uber when they signed this merger deal?
The PCC, the Philippines’ anti-trust body led by former socioeconomic planning chief Arsenio Balisacan, could do something and take the circumstances behind the sale into account as it examines the sale documents.
The National Privacy Commission should also step in to protect customers’ rights to their personal information, including payment or credit card information, which they had entrusted to Uber.
Colley on Monday warned: “Expect fares to increase and driver pay to [be]reduced as subsidies are withdrawn [when]the price wars come to an end.”
Corrine Png, a transport analyst from Singapore’s Crucial Perspective research firm, likewise said: “Industry consolidation will mean fewer choices for commuters and fares are likely to trend higher over time as the remaining players seek to improve their profitability longer term.”
Economists at the PCC should also examine whether the Grab-Uber deal could inhibit the entry of new players in the ride-hailing app market, and ensure that the market remains contestable and competitive.
Colley noted that the costs of switching between apps remained low for both drivers and customers, and no one held a monopoly of the technology.
Grab and Uber should know that Filipinos are wary of this deal, and Filipinos definitely know a thing or two about the issue, given their negative experiences with telcos, cable TV companies and other mega-mergers and monopolies.
(first published in The Manila Times – http://www.manilatimes.net/grab-uber-deal-must-go-through-fine-toothed-comb/389072/)
