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Uber Technologies sells its operations in Southeast Asia to local competitor Grab Inc


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Uber Technologies agreed in principle to sell most of its operations in Southeast Asia to local competitor Grab Inc, ending the expensive battle for market share in a rapidly growing region.
In return for operations in Southeast Asia, the company will receive approximately 30% share in Grab Inc. The two companies are still working on the final terms of the contract, they argue, warning that each transaction will be subject to regulatory control. One source claims that Uber’s share may be lower.
Uber spends about 200 million USD per year to compete with Grab Inc and other startups in the region like PT Go-Jek Indonesia. The Indonesia-based motorcycle taxi driver Go-Jek recently raised funding for more than 1 billion USD from KKR & Co and Tencent Holdings Ltd.
The spokespersons of Uber and Grab refused to comment on the subject.
Such a deal could ease the pressure on Uber’s new CEO, Dara Khosrowshahi, who is trying to keep the company’s finances under control before the expected IPO in 2019. Uber announced a loss of 4.46 billion USD in 2017 at sales of 7.36 billion USD. After taking office in September, Dara Khosrowshahi negotiated the sale of the losing business to the US car leasing company and reached an out-court settlement with Alphabet Inc because of allegedly stolen business secrets.
In the past few weeks, Dara Khosrowshahi has pledged to continue to fight for market share in Southeast Asia, even at the cost of high losses.
“We expect to lose money in Southeast Asia and expect to invest aggressively in terms of marketing and subsidies”, said the CEO of Uber during a visit to New Delhi last month, and earlier this month he added that Uber had invested hundreds of millions of dollars in the region, but it is difficult to compete with local competitors. “The economy of these markets is not what we want to be”, said Dara Khosrowshahi.
Uber demonstrates readiness to reduce losses in markets where it is difficult to keep a stake. Last year, the company reached an agreement to merge its Russian operations with Yandex.Taxi, forming a joint venture with Yandex’s parent company in return for nearly 37% of the shares. And in 2016, the company sold its Chinese business to Didi Chuxing Technology Co.
Talks with Grab include all of Uber’s core assets in the region, but the final deal may exclude small parts of operations in Southeast Asia.
A possible deal will be a confirmation of the investment strategy of SoftBank Group, which acquired a 15% stake in Uber in January for 7.7 billion USD. The Japanese company is also a major shareholder in Grab, Didi and Ola.
Beijing-based Didi expands to Japan in competition with Uber and recently bought the Brazilian 99Taxis – a popular taxi application. At the same time Ola and Uber compete in Australia.
Uber and Grab compete for Southeast Asian Leadership, where live more than 600 million people. The region’s market is expected to grow more than fivefold to 13.1 billion USD by 2025 from 2.5 billion USD in 2015, according to a report by Google and Singapore’s state-owned investment firm Temasek Holdings.