MUMBAI, India — In a new television ad, Uber’s chief executive, Dara Khosrowshahi, pledges to move the ride-hailing giant beyond its bad-boy past. “One of our core values as a company is to always do the right thing,” declares Mr. Khosrowshahi, who joined the business nine months ago.
But in Southeast Asia, “the right thing” is a matter of interpretation.
Uber’s abrupt exit on March 25 from eight countries — a month after Mr. Khosrowshahi publicly promised to “continue to invest very aggressively” in the region — has left regulators, drivers, riders and employees feeling bruised and disrespected.
Mr. Khosrowshahi’s decision to quit Southeast Asia reflects the pressure he is under from both Uber’s board and big investors like SoftBank to reduce the company’s tremendous losses as he prepares it for an initial public offering of stock. How he carried out the exit plan illustrates the challenges he faces in maintaining Uber’s trademark boldness while ditching its devil-may-care disdain for others.
“The whole thing was handled very badly,” said Justin Ang, who drove for Uber in Singapore for more than a year. “They basically just sent a message and said, ‘We are merging! Bye!’”
Under Mr. Khosrowshahi, Uber has gone out of its way to woo regulators and customers in important markets like London and France.
In Southeast Asia, though, the company made a cold-blooded calculation that regulators in eight countries had little power to stop it from exiting.
Uber presented the sale of its operations to Grab, its chief rival in the region, as a fait accompli. The Uber app was to shut down in two weeks, with customers told to download the Grab app and drivers encouraged to switch allegiances. Uber’s 500 employees in the region were immediately laid off with no clue whether Grab would offer them a job. And regulators were told there was no way the deal could be undone, even if they objected to Grab’s overwhelming dominance of the region’s ride-hailing market.
By all accounts, Mr. Khosrowshahi is a kinder, more empathetic leader than his predecessor, the combative Travis Kalanick, and he has taken concrete steps to improve the company’s dysfunctional culture. Just this month, for example, Uber abandoned a policy that had forced sexual misconduct claims into arbitration and agreed to provide some health benefits to drivers in Europe.
The company’s image was badly tarnished in recent years by revelations of an abusive office culture, active deception of the authorities around the world, accusations of theft involving a rival’s technology and open defiance of regulations governing ride-hailing operations. The scandals have had real financial impact, with Uber losing significant market share in the United States to Lyft, the No. 2 player there.
Uber, which is based in San Francisco, is also facing the consequences of its past behavior in overseas markets like London, its most profitable city. In September, regulators refused to renew Uber’s license to operate in the city, saying the company was not “fit and proper” to run a passenger transport service. Mr. Khosrowshahi publicly apologized, and the company has since made several changes sought by the city in the hope that the decision will be overturned on appeal as soon as next month.
Uber was much less accommodating in Southeast Asia.
The Competition and Consumer Commission of Singapore says Uber and Grab reneged on a promise to brief it fully on the details of the transaction before the deal was announced. (Uber says its lawyers provided an informal briefing a few days earlier.) The commission forced Uber to keep its app going until May 7, several weeks after the app was set to shut down, and barred Grab from raising prices for consumers or cutting payments to drivers while it considered whether to reverse or modify the transaction.
When antitrust regulators in the Philippines ordered the companies to maintain independent operations while they reviewed the deal, a top Uber executive in the region, Brooks Entwistle, responded at a public hearing: “Uber exited eight markets, including the Philippines, as of Monday. Now, I look after 10 markets, instead of 18. Our funding is gone. Our people are gone. We don’t intend to come back to these markets.”
That attitude did not impress Arsenio Balisacan, the chairman of the Philippine Competition Commission. “The acquisition results in a virtual monopoly of the ride-sharing market,” he said in an email. The commission has already seen prices rise and more driver cancellations of rides, resulting in poorer service, he said, adding that the agency was reviewing its options.
Malaysia and Vietnam are conducting their own antitrust inquiries.
In an interview, Uber’s No. 2 executive, Barney Harford, said the antitrust reviews in Southeast Asia were Grab’s problem.
“We are now a 27.5 percent shareholder in the combined entity,” Mr. Harford, the company’s chief operating officer, said in Mumbai last month. “That’s obviously not a controlling position, so the management team of the controlling entity are now on point for handling the regulatory questions.”
In a statement, Grab said that it recognized “the competition boards’ commitment to preserving competition, and trust that the reviews take into account a dynamic industry that is constantly evolving, highly competitive, and being disrupted by technology and new services.”
Go-Jek, the leading ride-hailing company in Indonesia, said last week that it would invest $500 million to expand in other Southeast Asian countries. Upstarts like Ryde and Hype have also announced plans to enter some of the markets abandoned by Uber. Grab and Uber both point to that emerging competition as a sign that their combination does not violate antitrust laws.
But from the perspective of the customer, it’s one fewer player in the market.
“Singapore’s cab service has been really atrocious, so I welcomed some competition,” said Dean Tan, an accountant in Singapore who used to take Grab or Uber at least five times a week. “I loved it when Grab and Uber kept giving promotion codes. It’s back to the same old days now.”
To investors, Uber did the right thing by selling its Southeast Asia operations. The company had steadily lost ground to Grab, which is based in Singapore, in recent years, and Mr. Khosrowshahi had to curtail Uber’s mushrooming losses, which totaled $4.5 billion worldwide last year, as an I.P.O. was planned for 2019.
Last week, Uber disclosed that it had a $2.9 billion gain in the first quarter from the sale of its cash-draining Southeast Asian and Russian operations, moving it out of the red at least temporarily.
“They need to take clear steps towards profitability,” said Rohit Kulkarni, who heads research at SharesPost, a San Francisco marketplace for trading shares in private companies.
By exiting China, Russia and Southeast Asia while retaining stakes in its former competitors, Uber will benefit from the industry’s global growth without needing to fork over more cash, Mr. Kulkarni said. It can instead focus on India, where it is locked in a bitter battle with Ola, the local leader, and on strengthening its business in markets like North America, Europe and Latin America.
Uber defended its handling of the Southeast Asia sale. It said it had complied with merger regulations and had gone beyond legal requirements in some cases.
“While it wasn’t an easy call, ultimately it was the right thing to do for Uber and our shareholders,” the company said in a statement. “We are absolutely committed to being true partners to cities for the long term, and this deal doesn’t indicate otherwise.”
Mr. Kulkarni said that although Uber’s culture was changing, the very nature of its business meant that it would keep upsetting the authorities.
“This is a company that is trailblazing,” he said. “So butting heads with regulators is something that they will continue to do.”
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