By Prarthana Mitra
Japanese conglomerate and investment giant SoftBank is reportedly brokering a merger between Ola and Uber in India in an attempt to consolidate its shares in cab hailing services around the world. SoftBank currently holds controlling stakes in both companies, occupying about 26% stake in Ola and 15% in Uber.
Local players in the picture
Uber has been acquired by local players in various countries, including Russia (Yandex), China (Didi) and Southeast Asia (Grub). Both Didi Chuxing and Grab are backed by Softbank, whose acquisitions over the last couple of years are indicative of a larger vision to consolidate Asia’s fast-growing ride-hailing app industry.
Partnering with #grab to create the market leader and bet on @AnthonyPY_Tan and team. Huge thanks to teamUber to get us here and good result for our shareholders and partners. https://t.co/c1ANSp9qjH
— dara khosrowshahi (@dkhos) March 26, 2018
As a part of this consolidation, SoftBank is trying to merge rivals Ola and Uber India, whose close competition in Indian cities is causing a considerable drain of its own resources. Considering how both the companies are backed by the same investor, economists and financial advisors think it is unprofitable if Ola and Uber are always at loggerheads when it comes to customer discounts and driver incentives. While both companies claim leadership in terms of market share the gap is not that wide.
Ola to take over Uber India if merger works out
Market reports suggest that Ola has a 56-70% market share worth $15 billion and is likely to take over Uber in India. The Bengaluru-based firm has over 900,000 cabs in service, in comparison to Uber’s 350,000. They were also prompt in launching a food delivery service in association with Food Panda, as an equivalent to UberEats.
Spokespersons for Ola have not denied the merger and said to media sources that, Ola will always be a part of “India’s transformative digital journey.” Another reliable source told the Business Standard that the deal may be closed in few months.
As speculation about the merger gathers more steam, Uber’s Chief Executive Officer Dara Khosrowshahi dismissed the rumours and said the US-based firm is currently focusing on organic growth. “We’d, of course, look at any deals that can add value to our partners and shareholders, but we believe in controlling our own destiny in India,” he said.
Rahm Shastry, an investor in taxiforsure, which was eventually sold to Ola, said he thinks the merger will tip the scales in favour of the drivers rather than customers who will no longer benefit from the discounts provided due to competition between the two contemporaries. He added he thinks cab fares will also rise once the competition is out of the way.
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