If you are an avid follower of all things tech and business, you wouldn’t have missed the proposed Uber-Careem deal. The global ride-hailing company, in March 2019, decided to buy its rival Careem in an attempt to enter the Middle East. Several months after and it looks as though the USD 3.1 Bn deal is taking ages to reach a conclusion.
Why The Merger Anyway?
Careem is growing meteorically in the Middle East nations, operating in more than 100 cities. Places such as Sudan, Egypt, Morocco, Lebanon, Palestine, Pakistan, Saudi, Kuwait, Iraq, and Palestine have their ride-hailing play dominated by the company.
With a huge base of over 1 million drivers, Careem was the first venture to cross the 1 billion threshold. Uber has a habit of trying to take over its rivals in other countries and gaining market share.
Like the drama with China’s Didi, Asia’s GRAB and America’s Lyft, it’s obvious Uber wants to indeed be global by acquiring smaller players. Summarily, Careem is a huge deal when it comes to taxi-hailing services in the Middle East.
So, What’s The Uber-Careem Problem?
It has been reported that Qatar is not keen on giving the Uber-Careem deal the green light. But that is just one of the many stampedes trying to suppress the transaction. But before we assume it’s an infringement on the right to do business, remember that the deal itself will have an impact on the startup ecosystem of the MENA region.
Being that these two taxi companies are leaders in their own lanes, the merger can cause a chasm in the ride-hailing industry of the concerned nations.
Apart from increased fares, there will likely be no way for new players to enter the sector. Considering both companies have come under fire at some points, it could be a golden opportunity for the less-recognized to rise to the occasion and evolutionarily become more cost-efficient, reliable local alternative.
Going against a duo of giants is, nonetheless, no cakewalk. Aside from that, the merger will also have an impact on employees. They will have to adjust to the changes that come with the transaction.
Uber Going Scot-free?
Of all the implications of the Careem acquisition, the most storied of them all is that the ride-hailing giant will be able to escape legal matters. It’s almost now a part of children’s bedtime stories that Uber is always in the midst of controversy.
Save rapes, murders, and theft that occur internally and eternally; the firm is always the talk of arguments. So doing, it would be harder for it to set up business in certain countries. A quicker and easier way to bypass this is to acquire smaller players.
The UAE and Saudi Arabia, among others, are known for strict laws, so acquiring Careem is a smart move from Uber’s end. It reduces the chances of getting banned.
But with the way things are going, some countries and bodies are aware that Uber is trying to play a fast one. Business is business, but such deals have implications some authorities cannot condone.
A No For Qatar and Egypt
Tech publication MENAbytes reported that the competition authority of Qatar had blocked the Uber-Careem deal in the country. Apparently, Uber’ SEC filing says that the concerned body has issued a decision against the merger.
While the Qatari authority is yet to issue any publication statement, it has notified both companies that their proposed merger will not happen under their watch. It’s unclear whether the decision would be changed with some negotiations, but Qatar is not the only country to have raised an eyebrow.
The Egyptian Competition Authority (ECA), just last Monday, tried to deter Uber and Careem from proceeding with the merger without obtaining express permission from the authority. What’s the reason? The body wants to make sure there are no monopolistic implications of the business.
Since the deal is a blatant attempt to overcome costly competition, this particular issue is trying to make sure that the activity will not harm it. To put the degree of this in perspective, Egypt used to protect Uber and Careem when they were individual companies.
Qatar and Egypt are not the only ones opposing the merger. Other bodies have also aired their concerns as to how Uber-Careem will hurt competition. No one is sure how Uber is going to wriggle free of these, but it surely has to do something about them.