If Uber wed Careem, who is going to look after the dependents? Dependents, in this case, being ride users and drivers. But that concern for competition may or may not come later; first the deal. Uber is reportedly acquiring its chief regional rival, the Dubai-based ride-hailing platform Careem, for just over $3 billion, ahead of its IPO filing next month.
If the deal, which is expected to be announced Tuesday (March 26) goes through, it will strengthen Uber’s hotly-contested SAMENA (South Asia, Middle East and North Africa) flank and help the company fetch better valuation ahead of the rumored IPO. Hats off to innovation and ingenuity that has transcended a transportation entity, which doesn’t mass-produce cars or even operate its own transport fleet, to a valuation of $120 billion, higher than any of the American or German auto giants.
But beware the disruptors becoming monopolists. It would be naïve to think that operational efficiencies coming out of Uber’s big purchase would somehow lead to consumers enjoying a fairly-priced service and drivers getting better contracts with Uber. Like the American corporate giants that have come before it, Uber may waste no chance to snuff out its rival(s) and consolidate the market.
How Uber hates competition, having lost more than ten billion dollars to rivals since its inception, has been manifest in the company swiftly retreating from emerging markets in recent years. For instance, fed up with losing money in the competitive Chinese market, Uber sold its operations to rival Didi Chuxing in 2016. By 2017, Uber had had enough in Russia, so it merged with main rival Yandex to form a new firm. In 2018, Uber sold its operations in the whole Southeast Asia region to grab in return for a stake.
Cutting losses in emerging markets has helped Uber financials, readying it for an IPO that can give early-stage investors a juicy exit. While buying Careem is Uber’s self-reassuring break from that cut-and-run strategy, the potential sale also puts a few question marks over the vision of Careem’s founders and patience of its financiers. Dubai-based investors and global financial media are hailing the “historic success” of this unicorn. But there is also the perception that this regional champion is being felled a bit early; that Careem could have gone global, leading the way for ambition of other regional champions.
Be that as it may, this acquisition would create, in effect, a monopoly for the pioneering American ride-hailing platform – until and unless Uber’s home-base rival “Lyft”, which is also eyeing an IPO, expands outside North America.
The monopolistic entity would then find it easy to dictate terms to both drivers and consumers. Pakistan is a major consumer market in the SAMENA region where Careem has been operational and giving a tough time to Uber. Platform users in Pakistan are bound to feel the difference.
Uber’s monopolization of ride-hailing economy may further complicate an unregulated environment where Pakistani e-commerce users are on their own on issues like dispute resolution, data privacy and payment security. This column has been highlighting the lack of an all-encompassing e-commerce framework (read: “Need for e-commerce regulations” and “E-commerce: get house in order”). The relevant ministries in Pakistan must not waste more time in formulating a holistic consumer protection framework.
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