Grab deal with Uber has a rocky road to navigate

Uber, Grab and Go-Jek face increasing scrutiny from Southeast Asia’s anti-monopoly agencies. (Getty Images)
Updated 08 April 2018
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Grab deal with Uber has a rocky road to navigate

  • If the deal falls apart, Uber could depart Singapore and leave Grab as the dominant player regardless.
  • Uber is already winding down its regional operations and has asked customers and drivers to transition to Grab’s platform.
Singapore: Regulatory scrutiny could complicate ride-hailing company Grab’s takeover of Uber Technologies’ Southeast Asian business, but there is little the authorities can do to stop Uber from simply exiting the region, lawyers and analysts said.
Days after the deal was announced last week, antitrust agencies in Singapore and Philippines began to review it, with Malaysia saying it would follow suit.
Antitrust lawyers say Singapore-based Grab could try to mollify regulators by offering concessions such as price restrictions and subjecting itself to greater regulations. It could also argue that consumers still have many ride-hailing options to choose from.
“Rather than throwing out the deal, and especially with potential new entrants coming in, I believe that with the right safeguards, with the right commitments, the deal can still go through,” said Gerald Singham, deputy managing partner at law firm Dentons Rodyk.
If the deal falls apart, Uber could depart Singapore and leave Grab as the dominant player regardless, experts said.
Uber is already winding down its regional operations and has asked customers and drivers to transition to Grab’s platform. Five hundred Uber staffers will also move to Grab.
Market share data on the ride-hailing sector is patchy, but mobile data analytics firm App Annie ranks Grab ahead of Uber in all the big economies in Southeast Asia in terms of monthly active users. The exception is Indonesia, where Tencent Holdings-backed Go-Jek was ahead.
“An antitrust issue is all about how can you minimize a monopoly which is hitting pricing power and is bad for consumers. But the reality here is that consumers have other options with the incumbent taxi operators in all markets,” said a person familiar with the Grab deal who was not authorized to speak to the media.
Uber is selling its Southeast Asia operations, including its food-delivery unit, to Grab after a five-year battle that cost the US company $700 million. In return, Uber will get a 27.5 percent stake in Grab, which is valued at roughly $6 billion.
Grab’s president Ming Maa told Reuters that passengers and drivers had plenty of other transportation options, from taxis to public transport.
And Go-Jek plans to enter Singapore soon in its first international expansion, the Straits Times reported last week.
Kala Anandarajah, who leads the competition and antitrust practice at Rajah & Tann Singapore, said that though barriers to entry in the ride-hailing sector were relatively low in Singapore and Southeast Asia, new entrants had to start off big enough to compete effectively with a potential Grab-Uber entity.
Singapore’s antitrust agency told Reuters it would consider Go-Jek and taxi companies such as ComfortDelgro Corp. as part of the market as it determines competition during its investigation of the Grab-Uber deal.
The interim measures proposed by the Competition and Consumer Commission of Singapore require Uber and Grab to maintain their pre-transaction independent pricing and not share any confidential data.
The commission said on Friday that Uber would put off shutting down its app in Singapore by a week until April 15.
It addded that it was reviewing proposals from both Grab and Uber to address its concerns.
Grab said it had “productive discussions” with the anti-competition agency on the alternative proposals, adding that thousands of former Uber drivers had signed up to Grab’s platform.
Grab has said the deal did not decrease competition and was beneficial to both riders and drivers.
“At this juncture, regulators don’t have much recourse since the assets being transferred from Uber to Grab are of little consequence. So even if the asset transfer is blocked, Grab’s goal, which is to push Uber out of Southeast Asia, has already been achieved,” said Corrine Png, chief executive of research firm Crucial Perspective.
“However, Grab will be careful not to step on the regulators’ toes,” Png added.


Boeing crisis, trade tensions cast pall over Paris Air Show

Updated 51 min 59 sec ago
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Boeing crisis, trade tensions cast pall over Paris Air Show

  • Marquee event is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry
  • Aerospace executives are concerned about the impact of the Boeing 737 MAX crisis on public confidence in air travel

PARIS: Safety concerns, trade wars and growing security tensions in the Gulf are dampening spirits at the world’s largest planemakers as they arrive at this week’s Paris Air Show with little to celebrate despite bulging order books.
The aerospace industry’s marquee event is a chance to take the pulse of the $150-billion-a-year commercial aircraft industry, which many analysts believe is entering a slowdown due to global pressures from trade tensions to flagging economies, highlighted by a profit warning from Lufthansa late on Sunday.
Humbled by the grounding of its 737 MAX in the wake of two fatal crashes, US planemaker Boeing will be looking to reassure customers and suppliers about the plane’s future and allay criticism of its handling of the months-long crisis.
“This is a defining moment for Boeing. It’s given us pause. We are very reflective and we’re going to learn,” Chief Executive Dennis Muilenburg pledged on Sunday.
The grounding of the latest version of the world’s most-sold jet over safety concerns has rattled suppliers and fazed rival Airbus, which is avoiding the traditional baiting of Boeing while remaining distracted by its own corruption probe.
Aerospace executives on both sides of the Atlantic are concerned about the impact of the crisis on public confidence in air travel and the risk of a backlash that could drive a wedge between regulators and undermine the plane certification system.
Airlines that rushed to buy the fuel-efficient MAX are taking a hit to profits since having to cancel thousands of flights following the worldwide grounding in March.
Even the planned launch of a new longer-range version of the successful A320neo jet family from Airbus, the A321XLR, is unlikely to dispel the industry’s uncertainty, analysts said.
The planemaker is hoping to launch the plane with up to 200 orders with the support of at least one major US buyer such as American Airlines but faces a last-minute scramble to win deals.
“Boeing’s MAX crisis isn’t the most ominous dark cloud, since it can be solved, but traffic numbers are genuinely scary,” said Teal Group aerospace analyst Richard Aboulafia.
“If March and April are a sign of things to come, we’re looking at broader industry demand and capacity problems.”
“Net orders might be the lowest in years,” Aboulafia added.
Others dismiss fears of a downturn, citing the growth of the middle class in Asia and the need for airlines to buy new planes to meet environmental targets.
“The only solution that the industry has is the newest most fuel-efficient aircraft,” John Plueger, Chief Executive of Air Lease Corp, told Reuters. “So that replacement cycle is going to continue.”
“We’re talking to so many airlines who still want more aircraft, and there’s really been no lessening of those discussions,” he said.
Boeing is delaying decisions on the launch of a possible new aircraft, the mid-sized NMA, to give full attention to the 737 MAX and last-minute engine trouble on the forthcoming 777X, industry sources said.
But it could unveil a number of deals favoring widebody jets where it has the upper hand against Airbus, including at least a dozen 787 aircraft for Korean Air Lines and some demand for 777 freighters. Airbus is meanwhile set to confirm an order for A330neo jets from Virgin Atlantic.
“We’ll have some orders flow. We anticipate some widebody orders that you’ll be hearing about through the week. But that’s not our focus for the show,” Muilenburg told reporters.
Robert Stallard of Vertical Research Partners expects roughly 800 aircraft orders at the show, but noted it can be hard to tell which are truly new, firm business or old orders, or switched models. That compares with some 959 orders and commitments at the Farnborough Airshow last year.
Some analysts pegged the likely total closer to 400.