Tuesday, 6 June 2017

BRAZIL: Uber Brazil Rival 99 Gets $100M From SoftBank

A Latin American competitor to Uber —99—has raised $100 million from SoftBank of Japan to fuel growth, the Brazilian startup’s chief executive says.

SoftBank will become a minority shareholder in the privately held 99, as the ride-hailing service Didi Chuxing of China did when it backed the startup in January.

SoftBank is also a major investor in Didi Chuxing.

For SoftBank, the investment is a rare deal in Brazil and comes in the middle of political upheaval.

The country’s president faces corruption accusations, and his future is in doubt. That political uncertainty is expected to further delay the economic recovery here, needed after two years of severe recession.

Yet neither the recent volatility nor the past uncertainty appears to have scared away SoftBank. It was not a major concern of the company, said Peter Fernandez, 99’s chief executive.

The political and macroeconomic situation did not affect our discussion, he said. That does not affect the fundamentals of our business, because at the end of the day, there are 200 million people who still need transportation.

Fernandez joined 99, based in Sao Paulo, in January 2016, initially brought on board as chief product officer by one of the company’s founders Paulo Veras. He was made chief executive in October.

Fernandez said that 99 planned to use the new capital to expand its peer to peer ride offering, called 99POP, which it started in the fourth quarter of last year.

The company, founded in 2012, initially focused on working with taxi drivers and was first called 99Taxis, providing an alternative to Uber.

It continues to grow in that area, but it is now putting more effort into the POP service.

The goal is to dominate Brazil and dominate peer-to-peer, the chief executive said.

He noted that in Sao Paulo, 50% of the company’s rides are peer-to-peer.

The company says it has more than 200,000 drivers and more than 14 million registered users.

Fernandez, though, understands that the sector is capital intensive.

We’re going to need to raise a lot more capital. This is just one step in a very long path ahead of us, he said.

New regulations approved by the Brazilian government this week could mean that Uber and companies that provide similar services would be unable to operate in the country.

Earlier this week, the majority of lawmakers approved the main text of a bill, which makes ride-hailing services such as Uber, Cabify and several local equivalents - a public interest activity.

The regulations turn cars providing services through the transportation apps, into taxis, with the same regulations applied including specific permits from city authorities, taxi license plates and meters, making it nearly impossible for such private firms to operate.

According to the bill, drivers working through apps like Uber will also be required to pay taxes on their earnings and carry insurance for passengers.

The new bill complicates things even more for the transportation apps - these companies had been previously allowed to coexist with taxis in cities such as Sao Paulo, home to the largest South American market for Uber and its equivalents.

Back in 2015, Sao Paulo mayor at the time, Fernando Haddad, created a new class of transportation service to accommodate the new mobility alternatives.

The discussion then evolved into a situation where companies could operate based on a online credit purchase scheme and effectively buy the right to have cars working under their apps and pay taxes to operate.

The scheme pioneered in Sao Paulo not only proposed to provide the Mayor's office with information on rides and set caps for the number of vehicles that can work under each tool, but also has been generating enough cash over the past year to build a hospital with 200 beds in the city.

Brazilian taxi unions and many politicians have accused companies such as Uber of unfair competition and local taxi drivers are expected to put considerable pressure on legislators to make the bill, which still needs to be cleared by the Senate, into law.

Uber said in a statement that the bill represents a backward law that does not seek to regulate its service but to turn it into a taxi operator and forbid its urban mobility model.

The company added it expects the debate around technology to continue in the Senate to ensure that the voice of millions of people in Brazil who wish to have their right of choice is heard.
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