Massive consolidation underway: SoftBank plays Uber and Ola merger card

In what appears to be a likely outcome just within a week of Uber decision to merge with Grab, the SoftBank-backed companies Uber and homegrown cab-hailing major Ola are reportedly calling a truce in India through a merger.

Media reports have surfaced hinting that both companies are merging and the deal may get closed in the next two months. SoftBank is orchestrating the merger.

Notably, the reports of the merger just come on the heels of Uber selling its business to Grab for a minority stake of 27.5 per cent in the merged entity. Besides cab-hailing business, it also sold out food delivery arm in the region to the SoftBank-backed local rival.

In one of the largest investments made by the Softbank Vision Group, it acquired about 15 per cent stake in Uber for about $7-8 billion in January this year. Meanwhile, it also owns around 33 per cent stake in the Bengaluru-based company.

Since SoftBank is the largest stakeholder in both ride-hailing firms, merger on the lines of Uber and Grab is feasible in India. The Masayoshi Son-founded Japanese conglomerate had played a pivotal role in consolidating the two in the SEA region.

According to a market and competitive intelligence company, Kalagato, Ola has witnessed a rise in marketshare from 53 per cent in July 2017 to 56.2 per cent in December last year. Meanwhile, Uber marketshare decreased by about 2.4 per cent from 42 to 39.6 per cent during the same period.

Besides 3X reach and over 2X network of driver partners than Uber (it has 4.5 lakh drivers), autorickshaw-hailing service seems to have helped Ola to gain more marketshare as it has a more frequent use case in traversing the shorter distance.

If the merger between two gets through, the crown of ride-hailing business in India will go to the merged entity as there is no other player left in the fray. And SoftBank would make a killing at some point in time (maybe 5 years later or more) when the merged entity will go public.

The merger reports were reported by Business Standard and Moneycontrol.