Finally, Grab is buying Uber Southeast Asia, as we had predicted.

Softbank probably pushed hard for this deal, before and after its US$10 billion investment into Uber a couple of months ago.

What are the implications to the market, the users, Go-Jek, and mobile payment development in the region? Here are some of our thoughts:

  1. Integration takes effort – however, as the drivers and [installed] users are highly overlapping, there is not much to integrate.
  2. If past experience of Didi-Kuaidi & Didi-Uber mergers had anything to offer, the integration can be very, very fast.
  3. Most of the Uber team who will be transitioned to Grab might not last (long) in Grab.
  4. For loyal Uber users, there will be a culture shock for a few days. But life goes on.
  5. This will probably not have any immediate impact on Go-Jek, as Uber has been pretty trailing far behind in Indonesia, especially in the two-wheeler market.
  6. However, Grab needs to finish off Go-Jek – as it can’t afford to lose in Indonesian market. The job will soon become easier as they can concentrate their firepower.
  7. Which means in order to be strategically safe, Go-Jek would probably lobby the government harder, and also go out attacking other markets Grab is active in.
  8. Another threat Go-Jek faces stems from investment (and investors) – it needs to constantly rake in big rounds to fend off Softbank portfolio’s onslaught. The patience and commitment of its existing investors will be tested. An eventual Grab – Go-Jek merger might be possible.
  9. Apart from Go-Jek, Grab will not have any significant competitor in the sector – they already mitigated the threat of Didi’s direct entry through enlisting them as a major shareholder. However, experience in China shows that if the sector is lucrative, there will be challengers.
  10. Government could be a blocker – in Singapore the authorities has already said any deal between Uber and Grab will be under scrutiny. In Vietnam the current Transport Minister probably favors taxi companies over Grab/Uber. We do believe some governments will look to Singapore to set policy precedence.
  11. Grab will probably also put a lot more effort on its payment & fintech services. That market in most of Southeast Asia still remains messy, with lots of players vying to replicate the success of Alipay in China.
  12. It will probably remain messy for a while. But if GrabPay eventually wins the market, this is what might happen.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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