Strange Facts uncovered in Grab, Uber & Govt. official statements

13 April 2018, Asia Pacific - Truth is stranger than Fiction and the strange facts uncovered in the chaotic aftermath of the Grab-Uber merger only further validates the importance of audacity over caution when competing in the ride-hailing industry and why it is time for governments to finally realize that they are dealing with an entirely new breed of entrepreneurs.

Strange Fact #1: Grab did not acquire any data from Uber

“Even after April 8, no data will be shared. There is no path for us to take Uber’s data. The data we have received from Uber is only upon consent and that is only on the driver’s side. Drivers have to consent and say, I’m ok to share this data to assist in the on-boarding process to be able to drive on Grab. That is the only that has happened and will happen. We are business as usual when it comes to data and protecting that data,”

Brian Cu, Grab Philippines Country Head in a statement to the Philippines’ National Privacy Commission (NPC) as reported on 6th April 2018 by The Manila Bulletin

 

"There is no acquisition of Uber data ..... The data we received from Uber is only upon consent, on drivers’ side; drivers need to manually consent to share their data to assist in onboarding process"

Brian Cu, Grab Philippines Country Head in a statement to the Philippines’ National Privacy Commission (NPC) as reported by GMA News on 6th April 2018

Great for privacy advocates but Data is king when it comes to the ride-hailing giants so it was indeed surprising that Grab acquired absolutely zero data especially after a very expensive payoff to Uber (27.5% of Grab which is valued at more than US$6 Billion).

Perhaps Grab got Uber’s operations in return for that very expensive payoff OR maybe not? Which brings us to Strange Fact #2 …..

Strange Fact #2: Uber literally dismantled its Southeast Asian operations on 25th March 2018, the day of the Grab-Uber merger announcement even before regulators approved the deal

"[From] a business standpoint, Uber exited 8 markets, including the Philippines, as of Monday. Now, I look after 10 markets, instead of 18. Our funding is gone. Our people are gone. We don't intend to come back to these markets."

Brooks Entwistle, Uber Asia Pacific Chief business officer in a statement to the Philippines Competition Commission (PCC) on 5th April 2018 as reported by The Rappler

 

Considering that Uber has exited the region on 25 March and clearly stated during the public hearing its incapacity to fund the operations in the Philippines, the parties have agreed to keep the Uber app operational with Grab bearing the costs, to give drivers and consumers time to adjust to Uber’s departure ….. Grab wishes to clarify that, although the Uber app continues to operate, it has limited functionality and little or no support.

Grab Philippines’ Response to PCCs Interim Measures Order Case no. M-2018-001 on April 9, 2018

Uber has been called many unpleasant and even unmentionable names but stupid has never been one of them.

Many things can go wrong during any merger from an unexpected lack of financing to regulator troubles. We mentioned in an earlier report that regulators might find it difficult to block the Grab-Uber merger due to its asset light nature:

Grab-Uber asset light merger is proving resilient to regulator probes. Was it a good deal for Grab?

From Uber’s standpoint, ‘might’ is not good enough and it had to be absolutely, 100% sure that Grab would not be able to turn around later and ask for the merger to be terminated and its money back especially after Uber had dismantled its Southeast Asian operation on the day of the Grab-Uber merger announcement and gone beyond the point of no return.

The ironclad guarantee that Uber needed would be that Grab cannot withdraw from the deal/merger for any reason whatsoever. However, Grab or any buyer/company management agreeing to such a deal would be inviting a serious lawsuit from its shareholders for negligence. Despite being a private company, Grab still has shareholders; very well-resourced ones in fact such as Softbank, Temasek, DiDi, China Investment Corporation, etc.

Therefore, the only way that the Grab-Uber deal makes sense is that Grab’s goal was never Uber’s data or operations, only that Uber no longer competes in Southeast Asia.

Of course, the proper and safe thing to do would have been for Grab and Uber to seek the Southeast Asian regulators’ approvals before proceeding and then instead of dismantling Uber’s operations, Uber’s operations should have been transferred to Grab in an orderly fashion but that would be a long drawn out process with no certainty of success. It appears Grab and Uber may have decided it was more expedient to force the regulator’s hand, i.e. easier to seek forgiveness than ask for permission.

Strange Fact #3: Everyone is confused as to what Grab really bought from Uber

"We'll see the terms of the purchase contract between Uber and Grab, but Grab should be responsible for paying taxation while operating in Vietnam ….. Grab will not only be asked to pay the tax arrears for Uber but also to report and pay tax on the purchase contract,"

Deputy head of the Inspection Department under the General Department of Taxation, Dang Duy Khanh told Dtinews as reported by VietNamNet Bridge on 5th April 2018

 

"This matter is Uber's responsibility. Grab did not buy Uber's legal status in Vietnam, which is the unit bearing all legal responsibilities for settling tax-related issues with the tax department …..”
Grab representative as reported by VnExpress on 6th April 2018

Unfortunately for governments, they will have to get used to such deals from the ride-hailing industry.

Strange Fact #4: Cambodia Transport Minister believes that Grab-Uber merger will bring down prices

 “….. the merging of these two on-demand services will bring down the price for the benefit of Cambodian citizens”

Cambodia Transport Minister Sun Chanthol as reported by The Phnom Penh Post on 11th April 2018

 

“We have met with City Hall many times to discuss regulations, but still they say they are not sure how to regulate us ….. “What are the rules? We don’t know.”

Hor Daluch, founder of Exnet (Cambodia’s first ride-hailing app) as reported by The Phnom Penh Post on 11th April 2018

Southeast Asia is made up of countries with highly different political cultures, states of development, income levels, populations and priorities. The Grab-Uber deal structure is clearly a product of that disparity.

Strange Fact #5: Motorcycles are not recognized as public transportation in Indonesia

Motorcycles aren’t officially recognized as a mode of public transport.

Indonesian Transportation Minister Budi Karya Sumadi on why he cannot set floor prices to protect motorcycle taxi drivers as reported by the Wall Street Journal on 2nd April 2018

Indonesia ride-hailing giant, GO-JEK (name originates from ojek, a transport service type that uses motorcycles) has over 400,000 motorcycle taxi drivers in 50 cities across Indonesia via its GO-RIDE service alone. If governments expect to effectively regulate ride-hailing services, their laws have to reflect the reality on the ground.

Not a strange fact but an honest depiction of the state of transportation in many markets

“Public transport is very much developed in other jurisdictions, but in the Philippines it is not ….. There are valid considerations which are unique to the Philippines”

PCC commissioner Johannes Benjamin R. Bernabe as reported by the Business Mirror on 5th April 2018

Ride-hailing giants may not have demonstrated profitability that justifies their sky high valuations but they have become integral to cities, especially those with underdeveloped public transportation systems and the influence that comes with being indispensable is highly valuable.

Related Reports:

Grab-Uber asset light merger is proving resilient to regulator probes. Was it a good deal for Grab?


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