Uber and Ola May Merge Into One – 3 Reasons Why This Makes Sense For Uber!

Softbank, the largest investor in both Uber and Ola is attempting a mega-merger of these two largest app-based taxi hailing companies in India.

If this happens, this would be a major consolidation in the online taxi industry in India, after TaxiForSure was acquired by Ola in 2015, for $200 million.

As per incoming reports, which still haven’t got confirmed, talks are on since last one year, and a major announcement can be made by June end.

Ola, Uber and Softbank have refused to either confirm or deny this.

Here are three reasons why this mega-merger seems reasonable and logical; at least for Uber, which is world’s largest app-based cab company:

 

Uber Wants To Focus On Core Markets

 

In case Uber and Ola finally merge, it would be part of the series of mergers and acquisitions, which Uber has unleashed in South East Asia, and Russia.

Uber is selling its market share to local competitors, and this is part of their strategy to increase profits, and avoid ugly price wars.

In China, they have already sold their unit to rival Didi, In Russia, they sold their unit to local biggie Yandex and this week, they announced their sale of Southeast Asia unit to Grab.

In an internal communication, Dara Khosrowshahi, CEO of Uber has stressed on strengthening their core markets, which is the USA and Europe. He said,

“The great news about our Grab deal is that it allows us to double down to invest aggressively in our core markets—and we consider India very much as core to Uber’s success. We’d, of course, look at any deals that can add value to our partners and shareholders, but we believe in controlling our own destiny in India,”

About India, things are still under wraps, but this statement does provide us with a hint – Merger with Ola is on the cards, very soon.

Uber Is Planning To Go Public Soon

Now, why this series of sell-offs happening for Uber? Because they are planning to go public, very soon; and for that, they will need to show solid proof of profits to potential investors.

The stock market only works on numbers, and they are hard to get.

By selling off their market share to local players, Uber is playing really smart here – not only they are cutting losses, but also ensuring profits by retaining a minority stake. Currently, Uber is burning $20-22 million per month, and their investors want this to stop.

In India, both Ola and Uber suddenly removed drivers incentives, and this is just one of the advantages.

Uber And Ola May Merge For Market Monopoly in India

And lastly, market monopoly. Softbank, which is the largest investor in both Ola and Uber is aiming to complete market domination in India, via this merger.

Once Uber and Ola combine into one, there would be literally no other player to challenge its dominance, and it is here that they can easily manipulate prices, and ensure more profits.

But for users, this is indeed a bad news.

Now, the only question which remains is: Who will hold the majority stake in the newly merged entity, Ola or Uber?

We will keep you updated, as we receive more updates.