Thursday, 29 March 2018
PHILIPPINES: Grab-Uber Merger , Most Employees Just Want To Know What Happens Next.
At the outset, it should be noted that comment on this makes the critical assumption that the merger will be approved by the Competition Commission.
Should regulators reject the merger, the following arguments will be moot.
There has been much talk about how the merger will affect innovation.
The most impactful innovation in this space was the use of smartphones to offer ride sharing services.
It dramatically increased the transport options available to consumers and, in some instances, offered better prices, both of which led to higher consumer welfare.
In return, the ride sharing companies formed a number of alliances with traditional transport providers GrabTaxi, UberFLASH - which further improved consumer choices, and also introduced additional services such as food delivery, e-wallet facilitating payments, and financial services through alliances.
The drivers and other delivery partners e.g. restaurants for UberEats formed another key group of stakeholders that benefitted from the emergence of these services.
They could utilise their time or assets e.g. cars, motorcycles, bicycles or personal mobility devices or PMDs to earn some extra income.
In other words, the shared ride companies offered business model innovation but other than the first big innovation, the rest were incremental additions to the first important idea.
Before we discuss whether the merger will lead to higher or monopolistic prices, it may be useful to remember that the intense competition between Uber and Grab was akin to a land grab.
In their zeal to acquire a larger piece of the business, the companies were probably doing unsustainable levels of discounting and subsidising.
With or without the merger, the discounting was bound to stop at some point in time, probably as early as next year, because of Uber’s planned IPO.
So it is likely that the only effect of the merger might be to advance the discontinuation of an unsustainable level of discounting and subsidising.
Even leaving the discontinuation of deep discounting aside, we should not be unduly alarmed about the loss of consumer welfare because of high prices for the simple reason that there is a cap on how much the new Grab can raise prices, especially in Singapore.
Singapore has a good public transport system and a taxi system that doesn’t charge high fares. Consumers will switch to these alternatives well before the new Grab starts charging monopolistic prices.
Let us now turn to how the merger will affect innovation and welfare for other stakeholders such as drivers and partners, such as restaurants.
I believe that the impact will be much less than is commonly believed and am sceptical about the merger’s detrimental impact on innovation.
In fact, as noted above, it may be a stretch to call some of these product extensions as innovations and there are a good number of providers offering these innovative services.
For instance, e-wallet services are being offered by many players, including SingTel. In services such as food delivery, there are several delivery options, besides the shared ride service providers, making the impact of the merger even less.
Given the low barriers to entry in this business and the low switching costs for consumers, more entrants may enter in the future as well, leveraging on the existing delivery network, a ready supply of cyclists, motorcyclists and PMD owners.
On March 28th, homegrown carpooling app Ryde announced it would be launching RydeX, its new private-hire car service, as part of its growth expansion strategy.
Even after the merger, Grab will continue to innovate.
Its competition with Uber was only one of the reasons for trying new strategies and offering new services.
Other reasons include enhancing its profit streams by leveraging its consumer base to sell multiple services e.g. GrabPay to customers or insurance to Grab drivers and leveraging its skills in technology e.g. matching riders and drivers. Both these motivations will remain powerful, post-merger.
Drivers may be one key group who may lose out because of the merger. The new Grab may need fewer drivers. The intense competition between the two providers lowered the prices of their services and increased demand.
When prices become higher they could have headed higher even without the merger, the demand might fall.
This is very much a part of the dynamics of competition. Entrants are attracted by the possibility of making profits, leading to excess supply and shakeout before a market discovers its equilibrium.
The Grab-Uber merger should therefore be seen from a dispassionate perspective.
Most analysts and observers overestimate the extent of innovation happening in this space and incorrectly label product extensions as innovations.
It is also incorrect to assume that whatever is happening today e.g. discounting would continue indefinitely, without the merger.
As a believer in free choice and markets, I have few concerns about the merger. In a free market system, there is no reason why any party including governments should stop Uber from selling its Southeast Asian business if it chooses to do so.
The argument that it would lead to monopolistic prices is flawed.
Because of sheer volume, not all former Uber drivers will be onboarded by Grab on April 8.
Come April 8 when the Uber app shuts down, not all 20,000 to 24,000 of its drivers would have transitioned to Grab, its former rival which would take over its defunct operations.
In a press briefing on Wednesday, March 28, Grab Philippines Head Brian Cu said that they have started the so-called onboarding process of Uber drivers since Monday, March 26.
However, because of the sheer volume of ex-Uber drivers transitioning, Cu said they would have to extend beyond the April 8 shutdown.
“We've been processing endlessly, tirelessly since yesterday all Uberkads or Uber partners who come here and we will continue doing this all the way up to, even after the Uber app is turned off because I'm not sure everyone can be here before April 8, Cu said in a mix of English and Filipino.
Cu said that all those who operated under Uber, as long as they were part of the masterlist submitted by Uber to the Land Transportation Franchising and Regulatory Board (LTFRB), will be activated on their platform.
Cu said they will not accept new operators.
Meanwhile, LTFRB Board Member Aileen Lizada assured the commuting public that fares will not be raised with Grab’s acquisition of Uber.
Grab cannot increase its fare on its own. We know their range. We monitor them. Any request for fare hike goes through a hearing, where commuter side is heard, where NEDA (National Economic Development Authority) helps us.
Grab knows how serious we are with violations as we fined Uber before, Lizada said.
Cu added that the increase in Grab's available drivers will also mean demand will be met better.
With the increased supply base, it’s easier to allocate, meaning surge will not be as frequent as it used to be, he said.
Although fares right now may not increase given the merger, Grab Philippines and Uber earlier submitted petitions to increase fares due to the tax reform law. The hearing is set on April 3.
Lizada also said that Grab will not monopolize the transport network vehicle services industry.
She said that other potential transport network companies have submitted applications to the LTFRB before but they are just waiting for them to complete their documents.
If you say that there is no competition, soon there will be. Owto, Lag go, and Hype had applied to be TNCs,she said.
Once all requirements have been submitted, Lizada said the regulatory board will deliberate if they will be accepted.
Many Uber drivers were confused by the situation.
At Grab’s onboarding site in Quezon City, Ruggo Rivero and Olga Diaz said they only found out that the Uber app will shut down on Monday.
It was very confusing for us. We only knew about it two days ago. As partners, we would have appreciated if we knew about this earlier given that Uber has not been meeting its target profits, Rivero said in a mix of English and Filipino.
With limited time in their hands, Rivero said he had to give up a day of driving just to finally process his papers. I could’ve driven now as surge pricing is higher but here I am now.
However, Rivero sees a light at the end of the tunnel with better income coming from his driving.
Well, I guess I’ll be earning more with Grab than with Uber. Olga earns more than I do when she drives for Grab. But at the end of the day, for us it’s all about service, he said.
On Monday, March 26, Uber announced that it decided to sell its operations in Southeast Asia to Grab. In turn, Uber will receive a 27.5% stake in the business.
Uber has found itself in PR hot water following multiple reports of employees and partners being impacted by the move.
In multiple media reports, Uber employees were reportedly told to clear their belongings and go on paid leave.
A video of Uber employees packing up was also leaked online. In a previous statement to Marketing, an Uber spokesperson refuted claims over job cuts, and added that both Uber and Grab are committed to putting their people first as part of this transition.
Grab’s spokesperson added that Uber employees, including its leaders, in its Southeast Asia operations will be offered employment in Grab.
Meanwhile, Uber employees whose coverage is wider than Southeast Asia will continue to work in Uber.
Grab later clarified once more that Uber employees were not communicated with due to the lack of access to contact information.
The stir surrounding the fate of Uber employees also did not go unnoticed by other technology companies, with several reportedly contacting employees in both digital and support functions for job opportunities, reported BT.
A quick check by Marketing also found a LinkedIn post by Fave’s head of people Audra Pakalnyte giving a shoutout to Uber employees looking for new career opportunities.
Partners of Uber were also impacted by sudden news of the merger, with Lion City Rentals (LCR) announcing on social media that the company and UberHUB would be closed until further notice.
LCR is Uber’s wholly-owned car rental subsidiary in Singapore, which taxi company ComfortDelGro has a 51% stake in. It later followed up by revealing that it is still seeking more clarity from the Grab and Uber merger.
The move also saw the abrupt drop out of Uber and UberEATS from Lazada’s LiveUp loyalty programme, which currently offers users discounts and rebates on services such as Lazada, RedMart, Netflix, Taobao Collection, Uber and Uber Eats.
Meanwhile, F&B partners with UberEATS had also expressed concerns over the merger and what it means for them in terms of new contracts, commissions and delivery radius, an ST report said.
One F&B partner also claimed in the report that these details were not discussed as of yet.
Industry players Marketing spoke to agreed that both Uber and Grab could have communicated better with employees and partners, despite the uncertainties of the acquisition.
While details of the acquisition should be kept closely guarded, Uber should have collaborated with trusted senior leaders to enable them to communicate with their teams, Lina Marican, managing director of Mutant Communications said.
For Lars Voedisch, principal consultant and MD of PRecious Communications, the move to communicate the move in this manner seemed rushed.
This is because mergers or takeovers of directly listed companies usually have a clearly prepared communications plan ready for multi-channel outreach and cascaded information layers.
To me it looks like a rush job decided on highest management and investor level to finally get it over and done with.
But without sufficient empathy applied to look at the immediate impact it has on the wider community of employees, drivers, passengers etc.
Recalling Uber’s past scenarios with poor PR, it was shocking that more emphasis was not put on planning and executing the communication better.
The communications also came across as cold and lacking empathy and that the takeover is a poor example of an M&A execution from a communications perspective.
As rumours regarding the takeover were out in the news for weeks, staff and drivers should have been notified first once the deal was finalised.
Staff needed to be informed in a humane and respectful manner.
Think about how the situation must have looked from an Uber employee’s perspective.
Asking them to leave within two hours and going to a Grab town hall a day later could make staff feel chased off and then ordered to the new boss. .
A town hall meeting jointly-hosted by Uber and Grab in the morning would have been a lot more personal than an email, allowing employees to ask questions and squashing doubts and rumours.
As a response to negative rumours, Grab was put in defence mode as they had to explain how they had no access to communicate with Uber employees.
It was also important to pick the right channels to communicate with F&B vendors and drivers. This will leave no room for speculation and third-party communication from the likes of ComfortDelGro.
The key learning point here is viewing the acquisition through the eyes of employees.
This is because employees would likely not be at ease after being told to leave the premises on a short notice, even if they are still being paid.
The big question all Uber employees have on their minds is whether they have a future or should they start looking for jobs. And these questions are spilling out onto social media.
It is not rocket science to say companies should anticipate questions employees will have and ensure they are answered satisfactorily before any kind of public announcement. A good litmus test is to ask If this happened to me, how would I react?
While Grab has stepped forward to say they are committed to try and find a suitable role for Uber employees, it’s not enough.
What Uber should have done was to provide clarity and earmark a communications process beforehand, followed by communicating this to employees before the public announcement.
The fact that a town hall was scheduled so late in the day, gave a lot of time for employees to be confused, angry and subsequently air their frustration on social media.
Most employees just want to know what happens next?