In a statement made Monday, Uber announced that it would be leaving the Southeast Asian region in order to cut back on substantial losses. The withdrawal, which covers eight countries in the region, entails selling the Uber enterprise to local competitor Grab and refocusing on its dominance in key markets.
According to Bloomberg, Grab will acquire all of Uber's operations in a region of 620 million people, including food delivery service UberEats. The US ride-hailing behemoth in return gets a 27.5 percent stake in Grab and its chief executive officer will join the board of the Singapore-based company.
Monday's announcement will be the third time that Uber has either sold or merged one of its businesses outside the US and retreated form expanding business opportunities. Uber previously sold its business in China to Didi in 2016 after a battle in which both burned through cash to court drivers. Uber negotiated a similar move in Russia last year, handing over its business to competitor Yandex. Investors see the withdrawal out of Southeast Asia as an opportunity for the ride sharing business to cut losses and free up resources for markets where it sees vast potential.
Since taking over from co-founder Travis Kalanick in August, Uber CEO Dara Khosrowshahi has tried to instill financial discipline to push toward profitability. The company has been trimming its losses through selling or merging businesses in order to concentrate on more opportunities in markets it dominates. Khosrowshahi has most recently been pushing to strengthen the financials of Uber, which has burned through $10.7 billion since its founding nine years ago, possibly in preparation for the company's planned 2019 IPO. Khosrowshahi has also attempted to clean Uber's tarnished reputation by mounting a public relations campaign.
Already in this year's first quarter results, Uber gained about US $3 billion from selling its businesses in Southeast Asia and Russia. Within the Southeast Asian market, Uber had steadily lost ground to Grab. In order to curtail Uber's growing losses, which totaled $4.5 billion worldwide last year, selling to Grab was the most profitable option.
Khosrowshahi noted in the statement that the deal "will help us double down on our plans for growth as we invest heavily in our products and technology." According to Khosrowshahi, the deal with Grab puts Uber in "a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don't."
Regulators are looking for a potential illegal monopoly within the ride sharing market as a consequence of the acquisition. Singapore's Competition and Consumer Commission announced they would be conducting a full investigation into the deal. The Vietnam Competition Authority said that it would block the deal if together the companies owned more than half of the market share in the country. Grab has stated that Uber and Grab's market share in Vietnam is still less than 30% with the recent acquisition.
Assuming Uber passes regulatory scrutiny, it can focus all its energies on mounting a 2019 IPO and putting pressure on management to turn the companies enormous losses into profits.