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ComfortDelGro in talks with Uber to help manage taxi fleet

Exclusive discussions on a 'potential strategic alliance' come amid group's shrinking cab business

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Getting in bed with the disruptor: ComfortDelGro notes that there is no certainty that the talks would lead to an alliance

Singapore

COMFORTDELGRO, Singapore's biggest taxi operator, is thinking of car-pooling with its competitor and ride-hailing heavyweight Uber.

The land transport giant, which operates Comfort and CityCab taxis here, announced after trading hours on Tuesday that it was in exclusive discussions regarding a "potential strategic alliance".

It disclosed that it had signed an exclusivity letter with Uber Technologies to explore forming a potential strategic alliance.

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This may include "collaboration in relation to management of fleet vehicles and booking software solutions in Singapore", including ComfortDelGro's taxis also being made available on Uber's app.

ComfortDelGro added: "There is no certainty or assurance that such discussions between (ComfortDelGro) and Uber will result in any definitive agreement or transaction or lead to a consummation of the Potential Strategic Alliance."

Keen competition from Uber and Grab with their ride subsidies has been chipping away at ComfortDelGro's taxi business, one of the segments that dragged down the mainboard-listed company's second-quarter results recently.

Q2 net profit fell 6.8 per cent to S$79.4 million, as the company reported that taxi revenue had slumped 10.7 per cent to S$303.9 million on increased competition, among other challenges.

Its taxi fleet here also shrank to about 15,500 units in June, or down 7.5 per cent from six months earlier. This makes its fleet size only slightly bigger than that under Uber-owned company Lion City Rental.

Daiwa Securities expects ComfortDelGro's taxi ranks to continue shrinking, although this would be due mainly to the expiry of older vehicles which the company is unlikely to renew until competitive pressures subside.

ComfortDelGro's taxi idle rate also increased to 5 per cent in Q2 from 3.5 per cent in the preceding quarter.

RHB Research says that while the new regulations for private hire car drivers from July 1, 2017 have helped to improve the hire-out rate, it expects the Q2 idle rate to be sustained for the rest of 2017.

Daiwa Securities estimates that a 10 percentage point decline in ComfortDelGro's taxi fleet utilisation rate would result in a 2.3 per cent decline in Daiwa's 2017 net profit forecast.

On the other hand, a five percentage point fall in the company's overall taxi segment operating margin would see a more significant 13.5 per cent decline in the 2017 net profit forecast.

In the stock market, ComfortDelGro shares closed two cents lower at S$2.17 on Tuesday.

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