Finally, last week Softbank announced that it has closed its $9.3 Billion investment in Uber. Since the deal was in the making for a long time, the deal itself is not news. What is news is what Softbank’s Rajeev Misra told Uber – to “focus on its core markets in US, Europe and Latin America”.
One way of reading this message is to see it as “keep off from competing with our other investments in Didi, Grab and Ola“. If Uber takes Misra’s words seriously (they better do, since Softbank is now probably Uber’s second biggest shareholder, after Travis Kalanick), it is likely that they’ll go less aggressive in Asian markets, including India. This is not going to be good for customers (both drivers and passengers) of taxi marketplaces in India.
Until 2014, the Indian market had three vibrant cab marketplaces – Uber, Ola and TaxiForSure. Then in early 2015, TaxiForSure was unable to raise further funding and sold itself to Ola, turning the market into a duopoly. Back then I’d written about why it was a bad deal for Indian customers, and hoped that another company would take TaxiForSure’s place.
Three years later, that has not come to be and the Indian market continues to be a duopoly. When I visited Bangalore in December, I noticed service levels in both Uber and Ola being significantly inferior to what I’d seen a year earlier when I was living there. Now, if Uber were to cede ground to Ola in India (as Softbank implicitly wishes), things will get further worse.
Back in 2015, when TaxiForSure was shutting down, I had assumed that another corporate entity, perhaps Meru (which runs call taxis) would take its place. And for a really long time now there have been rumours of Reliance entering into the cab marketplace business. Neither has come to be.
So this time my hopes have moved from corporates to politicians. The word on the street in Bangalore when I visited in December was that former Karnataka Chief Minister HD Kumaraswamy had partnered with cab driver associations to start a new cab marketplace, supposedly called “Tygr” (sic). The point of this marketplace, I was informed during my book launch event in Bangalore in December, was that it was going to be a “driver oriented app”.
This marketplace, too, has been coming for a long time now, but with the Softbank deal, it can’t come sooner. Yes, it is likely that it will not be a great app (if it is “too driver oriented”, it won’t get passengers and the drivers will also subsequently disappear), but at least it will bring in a sense of competition into the market and keep Ola honest. And hopefully there will also similar competition in other cities in India, though it is unlikely that it will be Kumaraswamy who will disrupt those markets.
A lot is made of the fact that investors like Warren Buffett own stocks in all major airlines in the US. Now, Softbank seems to be occupying that space in the cab marketplace market. It can’t be good either for drivers or passengers.