Uber slams brakes on another rivalry, this time in Russia
Company will merge with competitor, have 36.6% ownership
“This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business.” Pierre-Dimitri Gore-Coty, Uber’s chief of operations in Europe, the Middle East and Africa, in a statement
Uber long has set its sights on global domination of ride-hailing.
But while the start-up has bulldozed its way into more than 80 countries in just eight years, there are signs that its empire building will include some sizable retreats.
After shutting down its costly battle in China a year ago by selling its operations there to Didi Chuxing, Uber now is taking a similar white-flag path in Russia.
On Thursday, the company announced that it would merge its Russian business with rival Yandex, creating a new, yet-unnamed venture worth $3.7 billion when it closes later this year.
Under the terms of the deal, Uber will invest $225 million into the new business and have 36.6% ownership. Yandex will invest $100 million and retain 59.3% of the business. The rest of the company will be owned by employees.
The new business will serve customers in Russia, Kazakhstan, Azerbaijan, Armenia, Belarus and Georgia and will be run by Yandex CEO Tigran Khudaverdyan.
“Our users will have seamless global roaming across the Uber and Yandex.Taxi platforms,” Khudaverdyan wrote in a letter to employees, describing how an Uber app user from London would immediately be routed to a Yandex ride upon arriving in Moscow, and vice versa. “This creates one of the most convenient ride-sharing roaming agreements in the world.”
Uber put a positive spin on the detente agreement, noting that “this deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business,” Pierre-Dimitri Gore-Coty, who runs Uber’s operations in Europe, the Middle East and Africa, said in a statement.
Battling local rivals has required Uber to spend some of its nearly $15 billion in raised capital in order to keep fares low and entice drivers to its platform. Analysts long have been skeptical about the ride-sharing business model, and former CEO Travis Kalanick had said the company had to make strides in self-driving car technology in order to truly be profitable.
Uber in the first quarter narrowed its losses to $708 million on $3.4 billion in revenue, from $991 million on $2.9 billion in the fourth quarter.
On call with investors earlier this week, Uber executives told investors that bookings were up 10% in the recent quarter and that they should expect losses to narrow further, according to Bloomberg.
The Russian partnership news comes as the company continues to reel from a series of scandals that recently resulted in the resignation of Kalanick. The company was rocked by a February blog post by former engineer Susan Fowler, who described her year at the company as being rife with instances of sexual discrimination.
That post, along with bad publicity surrounding practices that often skirted the law, led to a leadership crisis that has the company, valued at nearly $70 billion, on the hunt for a CEO and other senior leaders. Uber also continues to battle self-driving car rival Waymo in court. Google’s self-driving car company has sued, contending that its former engineer, Anthony Levandowski, left Google with 14,000 purloined files related to its proprietary LiDAR (light detection and ranging) sensor technology.
Uber officials have denied any of those files were used in refining its own LiDAR tech. The case is scheduled to go to trial this fall.