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Business deals

Grab-Uber merger makes patchy debut in SE Asia

Homegrown, digital-driven 'regional champion' faces bumpy ride

Grab and Uber helmets on sale at a used-helmet shop in Jakarta, Indonesia, April 2, 2018.   © Reuters

SINGAPORE -- Uber Technologies on late Sunday simultaneously ceased its ride-hailing operations in Vietnam, Thailand, Cambodia and other regional markets. The serial shut down of Uber's operations in Southeast Asia -- apart from Singapore and the Philippines -- follows the recent merger deal with its former arch-rival, Grab, which makes the Singapore-based company the dominant player in the region. As it consolidates the merger, Grab is gearing up to be a pan-regional, digital lifestyle platform. But tough challenges are already looming.

In their merger announcement on March 26, Grab and Uber said their services would be integrated just as Grab by April 8 in the eight Southeast Asia markets where they previously competed against each other.

By Sunday midnight, local time, the Uber call app was no longer functioning for customers in Ho Chi Minh City. "Unfortunately, Uber is currently unavailable in your area," read the message on local users' smartphones in Ho Chi Minh City. "The Uber app will stop working at 24:00, local time on April 8," Nguyen Tuan Anh, chairman of Grab Vietnam, had told the Nikkei Asian Review earlier.   

As well as Vietnam, Thailand and Cambodia, Uber has also shut down services in Myanmar, Indonesia and Malaysia. Users in Thailand received an email from Uber earlier on Saturday, saying that Uber would cease operations of its ride-hailing business and "fully transition" to the Grab platform on April 8.

But Uber will remain in operation for the time being in Singapore and the Philippines, where local competition authorities are investigating the antitrust aspects of the deal. In Singapore, Uber will continue to operate until at least April 15 as authorities review the deal. Officials in the Philippines said Uber should remain in service until their anti-trust review is completed.

"Unfortunately, Uber is currently unavailable in your area," reads the message on local user's smartphone in Ho Chi Minh City.

Grab is now trying to attract Uber drivers, while encouraging Uber customers to use the Grab app. For example, Grab took control of the Uber app in Vietnam on March 26 and sent messages to Uber drivers and customers to download the Grab app. Previous Uber users are treated as new customers by Grab and will be given fare discounts and promotional offers such as free coffee and movie tickets based on a credit point system.

In Indonesia, 75% of Uber drivers had switched to Grab as of April 6, according to Ridzki Kramadibrata, managing director of Grab Indonesia. One former Uber driver who reluctantly transferred to Grab said he must compete against more drivers under Grab. "The competition was less tight at Uber," he noted.

Grab, which launched its first operations in Malaysia in 2012, is capitalizing on the region's relatively poor transport systems and rapid smartphone penetration.  It has uniquely created a homegrown pan-regional business that can provide multiple digital services, including online delivery and payment systems.

The Uber deal was a key step in Grab's efforts to become the dominant player in Southeast Asia. "We have proven that Southeast Asian companies can and will continue to build regional champions," Grab Chief Executive Anthony Tan told business news broadcaster CNBC on Friday. The merger gives Grab "a clear path to profitability" in the ride-hailing business. Grab will now focus on expanding its food delivery and financial services, he added.

Grab's ambitious expansion path, however, may not be as smooth as Tan expects. Indonesia's Go-Jek, which currently focuses on its home market, is gearing up to expand its ride-sharing services to neighboring markets. Go-Jek, which is backed by China's Tencent Holdings, also provides payment and food delivery services.

Chinese companies are also likely to get into the act. Alibaba Group Holding is introducing its Alipay payment service to Southeast Asia. Alibaba announced on April 2 that it would acquire China's food delivery service, Ele.me, as part of an effort to broaden its delivery business.

With the Grab-Uber deal, customers, investors and regulators will now watch on how the merged company will compete or cooperate with these rivals. 

"I seek all the best advisers to help us grow old and fulfill that big responsibility that we have," said Tan, referring to such business leaders as Alibaba's Jack Ma, Softbank's Masayoshi Son, Didi Chuxing's Cheng Wei and Uber's Dara Khosrowshahi. "I'm just a guy in Southeast Asia who literally built the regional champion."

Erwida Maulia, Nikkei staff writer in Jakarta contributed to this story

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