Grab won but Japan’s Softbank stamps dominance

People walk behind the logo of SoftBank Corp in Tokyo December 18, 2014. REUTERS/Toru Hanai/File Photo

GRAB has won the war over the ride-hailing business in a region of 650 million people. But the real power behind the throne in the ride-hailing segment of the transport industry is Japan’s Softbank and to some extent China’s Didi Chuxing.
Its deal with Uber will see the Malaysian-founded company emerge as the dominant brand player in the ride-hailing business. Uber will merge its operations with Grab in exchange for a 27.5% stake in the latter.
The transaction values Grab – which is founded by Malaysians Anthony Tan and Tan Hooi Ling - at about US$7bil, higher than the US$6bil it commanded in July last year. Anthony Tan is the grandson of the founder of Tan Chong automotive group and teamed up with Tan Hooi Ling when both were studying in the US.
Grab, which started as MyTeksi in Kuala Lumpur and relocated to Singapore because of the more vibrant fundraising environment there, has firmly established itself as the most expensive technology company in the region.
The consolidation is another move by Japan’s Softbank to put together its interest in the slew of ride-hailing companies around the globe. Softbank, which is owned by Japan’s Masayoshi Son, is a substantial shareholder in Grab and also Uber.
Softbank also owns stakes in Didi Chuxing and India’s Ola.
When Grab raised US$2bil in July last year, the bulk of the money came from Softbank and China’s Didi Chuxing, which was already an existing investor.
When Uber was in trouble last year, Softbank also put money in the US-based ride-hailing company in return for a 15% stake.
Grab’s biggest competitor now is Indonesia’s Go-Jek, which is backed by Google and China’s Tencent Holdings Ltd. Tencent itself is a technology giant that is challenging Jack Ma’s Alibaba in all segments from e-commerce to financial technology products in China.
In the grand scheme of things, Malaysia is lost with no role to play in the rise of the hail-riding business in the region. Except for regulatory approvals, local funds do not feature highly to take advantage of Grab’s rising valuations.
There was a time when the taxi permits were highly sought after because it was a ticket to making easy money. Hundreds of permits were given to the well-connected companies who in turn leased it to drivers.
Today, taxi companies are down. The drivers readily give away their cars. The traditional taxi fares cannot compete with fares offered by Grab. Taxi drivers have resorted to offering services under Grab.
What is interesting is that the business is no longer under the control of Malaysians or even the regulatory authorities.
It is the likes of Softbank and Didi Chuxing, with the billions they have poured into the ride-hailing business that ultimately control the ride-hailing business. Softbank in particular pulls the strings on how the ride-hailing business will move next.
Softbank wants to see Uber that is said to be valued at US$56bil, listed next year. Speculation is also rife that Uber, at the behest of Softbank, may exit India through a merger with Ola.
The challenge for loss-making Uber is to get a valuation that befits its status as the king of ride-hailing business. That would be difficult.
As for Grab, it would only be a matter of time before it is listed. Its financials are not known but one can only assume that it is not profitable due to the discounts it has to give away to gain market share.
Only after the successful listing of Uber would the market be able to assess the value of Grab. Until then, Softbank calls the shots.

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