grab-gojek merger
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[Article has been updated on 29 January 2021]

According to sources in Jakarta, the proposed merger between Grab and Gojek is no longer taking place.

The sources told The Business Times that the region’s two largest ride-hailing firms were unable to agree on various issues, including “valuation and corporate culture”.

News of the possible merger also led to public backlash in Indonesia, with Indonesian motorbike driver unions threatening to kick off protests due to fear of major job losses.

Furthermore, Hadi Cahyadi, founder and managing partner of Helios Capital, said that the individual strategies of both companies may not gel well.

He added that analysts have said that Gojek is planning an initial public offering (IPO) in the United States and Indonesia.

Similarly, it is reported that Grab is also exploring a listing in the United States this year.

Separately, Gojek is also reported to be in advanced merger talk with Indonesian e-commerce site Tokopedia and financial analysts have said that this potential merger is more complementary than Grab-Gojek.

Clearly, a Gojek-Tokopedia entity will place a significant threat to Grab’s dominance in Indonesia.

With access to hundred millions of potential Tokopedia existing users, Gojek would be in an even stronger position to introduce their service offerings to a wider audience base.

The Gojek-Tokopedia entity will also hold a dominant position in the country’s e-commerce, digital payment, ride hailing, as well as the food delivery business.

As Gojek ramps up discussions with Tokopedia, the combined Gojek-Tokopedia entity may introduce a whole new Indonesia powerhouse that may be detrimental to Grab’s ambition in being the region’s dominant superapp.

For the past few years, Grab Holdings and Gojek have been locked in a long and expensive battle for dominance in the Southeast Asian region.

According to annual filings, Grab has been burning through cash and lost more than US$200 million in 2019.

To alleviate this problem, a merger between the two ride-hailing and food delivery giants has been in the works since last year.

According to The Straits Times yesterday (December 2), Grab and Gojek have made “significant progress” in working out the terms of the merger.

A structure with substantial support sees Anthony Tan becoming the CEO of the combined entity, while Gojek executives would run the business in Indonesia under the Gojek brand, reported The Straits Times.

The ultimate goal is to become a listed company, but the two brands may run separately for an extended period of time.

On Thursday (December 3), Grab told its employees in an internal note that “the firm is in a position to make acquisitions”.

“Our business momentum is good, and as with any market consolidation rumours, we are the ones in a position to acquire,” said Grab co-founder and CEO Anthony Tan.

Although some details have yet to be finalised, people with the knowledge of the talks have said that the two startups have managed to narrow some differences in opinions.

Both Grab and Gojek declined to comment.

The Biggest Internet Merger In Southeast Asia

grab singapore
Image Credit: CNBC

Currently, Grab and Gojek are considered as some of the largest startups in Southeast Asia.

Grab is present in eight countries and was last valued at more than US$14 billion (S$18.75 billion), while Gojek has a presence in five countries and is valued at US$10 billion (S$13.38 billion).

Its potential merger is said to be the “biggest Internet merger in Southeast Asia”.

Investors have long been pushing for the two startups to combine forces across Southeast Asia. Currently, SoftBank Group’s Masayoshi Son, a major Grab investor, is also involved in the merger talks.

According to The Straits Times, SoftBank has been pushing for the deal since Masayoshi visited Indonesia this January.

What A Grab-Gojek Merger Will Look Like In Singapore

gojek rider
Image Credit: Entrepreneur

For a start, Singaporeans can potentially see more of Gojek’s features in Singapore.

Gojek currently only offers ride-hailing services in Singapore, but provides over two dozen features in its home country Indonesia.

Although Gojek has pulled the plug on several of its GoLife services, it has retained some features, including GoMassage (spa and massage) and GoClean (house cleaning) services.

In an interview with TODAY, Gojek’s general manager Lien Choong Luen commented that bringing these services to Singapore would always remain a “commercial decision” and that the firm will continue to evaluate such options.

Additionally, as Grab and Gojek will no longer have significant competition in the arena, they are unlikely to dish out promotional codes to attract new users to its platform, like it used to in the past.

It will therefore be important for the Singapore government to step in with its anti-monopoly laws to ensure that consumers and other businesses are protected from anti-competitive practices.

With these laws in place, it is possible that more ride-hailing players will enter the scene.

Currently, transport apps are already being rolled out quickly, with around half a dozen new ones in as little as a few weeks.

What’s In It For Consumers?

grab car singapore
Image Credit: Wired

Many Singaporeans can probably remember the days when Grab and Uber had a price war in the country.

Back in 2016 — the days when Grab faced heavy competition from Uber — consumers were heavily rewarded with a slew of promotional codes from both ride-hailing companies.

Both companies utilised predatory pricing, where they set the costs of a service (i.e. rides) at a price lower than the marginal cost to the seller.

Through this, both companies were able to keep the costs of rides for passengers down, while upping the ante for low cost rides — all with the singular goal of eliminating the competition.

When Grab acquired Uber’s Southeast Asia business in March, both companies were slapped with combined fines of $9.5 million after the merger deal was found to have violated Singapore’s anti-competition laws.

The deal was declared as “anti-competitive” by the Competition Commission of Singapore after months of investigations into the merger.

Similarly, the Grab and Gojek is likely to lead to a monopolisation of the market, which will not benefit consumers.

Hence, while the merger is beneficial to cutting costs for both companies, it is important that the government ensures that regulations are in place to protect the interests of consumers.

Featured Image Credit: Kompas Tekno / SBR

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Vulcan Post aims to be the knowledge hub of Singapore and Malaysia.

© 2021 GRVTY Media Pte. Ltd.
(UEN 201431998C.)