The Godfather of global transport: How Softbank gains the most from the Grab/Uber deal in Southeast Asia

Inc. Southeast Asia | 26 March 2018
Photo c/o Getty Images
Co-reported with Marishka Cabrera

Japan’s SoftBank is positioning Uber in strategic locations where it doesn’t have to compete with local rivals

Is this a case of keeping your friends close but your enemies closer?

Following weeks of speculation, Grab finally made it official today that it has acquired Uber’s Southeast Asia operations and assets in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—the largest-ever deal of its kind in Southeast Asia.

Now the no. 1 online-to-offline (O2O) mobile platform in the region, Grab may have emerged victorious in the race toward getting the most market share in the ride-hailing app sector—as of press time, the company announced it has reached over 90 million downloads with more than five million drivers and agents now in its fleet—but a closer look at the deal reveals the real winner to be SoftBank Group Corp (SoftBank).

The Japanese technology conglomerate and late-stage start-up investor, whose total investments in Grab now amount to $1 billion, had closed its long-pending $9 billion deal with Uber in late December 2017. According to Crunchbase, the massive investment brought with it a series of changes, the most notable of which have been SoftBank effectively becoming Uber’s largest shareholder at 15% and Rajeev Misra, a member of SoftBank’s board of directors, taking a board seat at Uber.

As the Grab and Uber merger gives Uber a 27.5% stake in Grab, the deal fits in well with SoftBank’s rather clever plan to position Uber as the leading ride-hailing app in strategic locations around the world where it does not have to compete with local players. By the same token, the local competitors that Uber was trying to wrest customers away from will also gain from Uber’s exit. Yet the ultimate winner will be Softbank, pulling the strings from Tokyo and London, whose investments in both Uber and its erstwhile local rivals will rise in value as the fierce competition for ride-hailing apps abates in key Asian markets.

Setting the stage for Southeast Asia are SoftBank’s recent moves in China and India.

In May last year, SoftBank contributed $5 billion to the $5.5 billion fundraising round by China’s Didi Chuxing, and in December took part in another round of funding amounting to $4 billion, according to Bloomberg.

Uber had high hopes when it entered the Chinese market in 2013. But fierce competition from local rival Didi led Uber to sell its China operations in 2016 in exchange for 20% stake in Didi and a $1 billion investment from the Chinese ride-hailing company.

In India, local transportation app Ola scored $2 billion in fresh funding from investors, including SoftBank in 2017 in a bid to shore up its lead against Uber. Though Uber hasn’t thrown in the towel just yet, Ola is racing ahead as it operates in 110 cities compared to Uber’s 31 and has over a million drivers crushing Uber’s 450,000, according to data from Quartz.

The battle isn’t quite over for SoftBank just yet. Grab may now have enviable market share in Southeast Asia’s ride-sharing market, but there’s still Indonesia’s now-$5 billion market leader Go-Jek to contend with.

Backed by Google and Tencent, Go-Jek has yet to expand across Southeast Asia. In December 2017, the company announced plans to enter the Philippines in 2018. When it does, competition between the two start-ups may first kick-off in the ride-hailing category, but with both Grab and Go-Jek making more investments into food delivery, logistics, and mobile payments, the bigger race will be: Who will win the larger prize of Southeast Asia’s on-demand economy? No doubt SoftBank will have a say.