Not so Fast: the Uber-Careem Merger Isn’t Done Yet
Egyptian regulators could halt the $3.1 billion acquisition
Uber’s acquisition of its Middle-Eastern competitor Careem has been rumored for quite a while, but just because the $3.1-billion deal is signed doesn’t mean it’s smooth sailing ahead. Regulators still need to approve the purchase in the fifteen countries where Careem operates, and while that shouldn’t be a problem in many of them, Egypt could be a major roadblock.
Under the deal, Uber and Careem will continue to operate as separate brands, but the new monopoly will allow the ride-hailing companies to raise prices since competition will be an illusion. This is a change from Uber’s usual approach to major competitors, having previously sold its operations in China to DiDi, Russia to Yandex.Taxi, and Southeast Asia to Grab, but not a change in the monopolistic tendencies of the industry. Uber has already announced its intention to become the “Amazon for transportation,” inspired by its platform monopoly in e-commerce.
Careem operates across the Greater Middle East, which spans from Pakistan in the east to Morocco in the west. Approval shouldn’t be a problem in Saudi Arabia, where investors are due to see handsome profits from the acquisition, nor in Careem’s home country, the United Arab Emirates, where Skeikh Mohammed said the announcement showed the success of Dubai’s Internet City and that tech companies can flourish in “the ‘desert’ of Dubai.”
In contrast, taxi drivers in Turkey took to the streets to protest the deal. It remains to be seen how Turkish and other authorities will respond to the proposed purchase, but Egypt’s regulators have already made their position known.
The Egyptian Competition Authority confirmed it received formal communication of the deal on Tuesday. In September 2018, after rumors of merger talks were first reported, the ECA warned Uber and Careem that pursuing a merger or any agreement that would restrict competition would be in violation of Egyptian law. Both Uber and Careem were also temporarily banned from operating in Egypt from March to April 2018 after a lawsuit was filed by taxi drivers.
The Egyptian Competition Agency warned Uber and Careem that a merger or any other agreement to restrict competition would be in violation of Egyptian law.
In 2017, Uber said that Egypt was one of its fastest-growing markets and opened a $20-million support center to expand its operations across the African continent. Cairo is also the test market for on-demand minibus services launched by Uber and Careem in December 2018. UberBus has just two limited routes which run close to existing and planned metro lines, while Careem’s offering seems to have a wider service area. It plans to expand bus services to Saudi Arabia and Pakistan.
The Uber-Careem merger is clearly designed to please investors ahead of Uber’s planned IPO, which could come as soon as April 2019, especially as the company seems unable to show how it will ever be profitable. Monopolizing markets where it faces fierce competition, or getting out of them as it did in the past, is a way for Uber to prove it’s trying to address the issue.
But while higher fares and monopoly might sound good to shareholders, it’s in clear violation of the rules the ECA will apply when it assesses the merger, which means there’s a fight ahead for Uber in Egypt. That begs another question though: as long as the deal isn’t canceled until after the IPO, does Uber even care? Only time will tell.