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Business Deals

SoftBank aims for global ride-hailing alliance with Uber stake

Partnerships may emerge with rivals like Didi Chuxing and Grab

Uber's earnings in Asia have been lackluster amid stiff competition.   © Reuters

PALO ALTO, U.S. -- SoftBank Group is readying ride-hailing alliances around the world after taking a 15% stake in Uber Technologies to become the top shareholder. But the Japanese technology giant will have to improve the American company's culture and earnings for its investment to prove a success.

Exit from Asia

SoftBank has invested in several other ride-hailing companies worldwide, including China's Didi Chuxing, Singapore's Grab and India's Ola.

Didi is one of China's largest ride-hailing apps, with more than 400 million users, and has already purchased Uber's operations in the country, as the rivals stake out their territories. In January, Didi announced its acquisition of Brazilian counterpart 99 in a push to cultivate new markets.

Grab, meanwhile, controls 70% of Southeast Asia's ride-hailing market and has far surpassed Uber in the region. Ola already has 450,000 users in 102 cities across India's budding market.

Investors are pressuring Uber to quit unprofitable markets like Southeast Asia given weak earnings there as it heads toward a public listing around 2019. Uber is negotiating with Grab behind closed doors, say those involved, in a likely exit from the region. It will instead focus on areas where it has relatively strong brand power like the U.S., Europe and Australia.

New route needed

Uber will therefore put profitability first as it aims to go public, starting with the decision to sell its money-losing auto lease business late last year.

SoftBank is likely to play a role in Uber's turnaround by improving management and encouraging partnerships with companies like Didi, Grab and Ola. The companies could share technology and map data, cooperate to introduce Uber's self-driving technology or help attract travelers and other customers from different markets.

SoftBank will also add two representatives to Uber's board. One is Rajeev Misra, head of the group's 10 trillion yen ($90.4 billion at current rates) Vision Fund set up with Saudia Arabia. The other is Marcelo Claure, a Bolivian-born businessman SoftBank CEO Masayoshi Son tapped to lead U.S. mobile carrier Sprint's recovery.

"Uber has a very bright future under its new leadership," Misra wrote in a statement, promising to promote the platform's global growth.

Leaving the past behind

Uber founder Travis Kalanick and large investor Benchmark Capital, whose power struggles have crippled management in the past, both sold shares to SoftBank in an effort to create a stable, neutral stockholder. The next task will be to ease internal tensions and secure new CEO Dara Khosrowshahi's power base.

Kalanick, the former CEO, was the ringleader behind a company culture that ignored compliance, disregarded sexual harassment claims and developed software to dodge regulators' inspections, among other issues.

At the least, SoftBank has succeeded in reducing Kalanick's influence from an ownership standpoint. Yet doubts remain that the $7.7 billion investment for a 15% stake will give the Japanese group enough control to steer Uber's course.

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