Patari Messes Up, again; Uber-Careem Deal

Patari Messes Up, again:

By now you might already be aware of Patari debacle. I wrote when this whole saga began:

What Patari has is nothing substantial as of now. At least not in financial terms. What it had was the trust. A belief that it’s doing something amazing. And in the process is helping revive the music industry of Pakistan. Nothing hurt that trust more than reports from last week. You lost your community’s sentiments. And in a way that’s all you had. With that said I don’t think all is lost. Kudos to the board and the rest of the team for stepping in quickly. As you probably know Bajwa is out. And Ahmer Naqvi is now the interim CEO. They did the right thing. But a lot more needs to be done. Those twitter jokes will be weird for now. And it will be a hard time for the team to change and instill new spirit into the company’s culture.

The team ended up doing more. Just not what I hoped they will. I have more to say about this. And the article, depending on the schedule, might already be on TechJuice. Speaking of TechJuice, I wrote about Popinjay (yes I realize it’s a bit late but it’s worth checking out) and on the selection processes of our incubation centers. I hope you are liking the diversification in writing. It’s proving fruitful to me at least. Do let me know.

Uber-Careem Deal

From Bloomberg (via TechJuice):

Uber Technologies Inc. and Careem Networks FZ are in preliminary talks to combine their Middle Eastern ride-hailing services, hoping to resolve a costly rivalry as Uber prepares for a public offering next year, according to three people familiar with the matter.

I wrote on Uber exiting Southeast Asia in favor of Grab back in March. From the article:

This is an interesting development but not a surprising one. Uber is at a point where they need to prove their worth. Not just as a company well run but also with numbers to push for an impending IPO. The company is no longer the default choice especially in countries outside the US. It’s Didi in China, Yandex in Russia, Careem in Pakistan and Middle-east, Grab in Southeast Asia and Ola in India. Even in US Lyft has gained significant market share away from them in 2017. So a deal to the tunes of Didi and Yandex makes perfect sense. I won’t be surprised if a similar deal comes up for Careem and Ola in near future.

My prediction went well, I believe. In April, Uber was in serious talks with Ola to merge in India. And now a discussion is in place with Careem. But these deals, unlike the previous ones, are not so simple. I wrote about Uber-Ola deal back then:

Let’s start with China. Uber was competing against two companies which later merged into one. While that’s not so bad. The fact that both merging companies were local and Chinese government wanted the resulting entity to win is. It was going to be an uphill battle with no end in sight. The equity shares Uber managed to squeeze in was actually a win for the company. In Russia and Southeast Asia, while markets were relatively open from a regulatory perspective, the number of local competitors were too many. Especially in Southeast Asia where the situation was further complicated by the fact that Uber was competing against local players in each country. Plus a player who was competing in all markets much like Uber itself i.e. Grab.

The situation in India is different. There is only one competitor i.e. Ola. India is not like China. And despite the fact that Ola has a bigger share of the market, Uber’s share is actually substantial. The numbers are often convoluted but it’s most likely that Uber had 30-35% and Ola has 40-45%. The difference is trivial especially considering that Uber operates in 30 cities and Ola in 110. Plus, unlike Southeast Asia, India is one country. A country with 1.3B people no less. The market is just too big for Uber to give up anytime soon. Especially considering how well positioned they are.

Sorry for the long excerpts. But things that were true for Ola are actually true for Careem as well. Careem has one advantage over Ola though. And that’s like Grab it’s dominant in multiple markets. But unlike Grab, the individual markets are much bigger. Pakistan, Middle-east, and KSA are much bigger than say Singapore or Philippines. Indonesia has a larger population size but the population is scattered across smaller islands and hence needs more capital investment. It’s natural for Uber to resist the exit strategy. While they need to show the strong numbers for IPO constraining themselves too much into US and EU can be dangerous in the long run. Uber by far is the largest transportation as a service company in the world. And it would like to retain that position.