Is deal boon or bane for taxis? Jury is still out

Singapore

WITH Uber set to bow out from South-east Asia, industry analysts say that uncertainty looms over the impact on taxi giant ComfortDelGro.

Investors may have sensed that Uber's retreat marks an easing of the pressures on the disrupted taxi industry. ComfortDelGro's counter saw a brisk churn of 19.83 million shares on Monday, ticking upwards by S$0.05, or 2.51 per cent, to S$2.04 amid a slightly weaker market.

But the Uber-Grab merger could cast a pall over ComfortDelGro's planned acquisition of Uber-owned rental car business Lion City Holdings. The deal, announced in December, is still under review by the Competition Commission of Singapore (CCS).

DBS analyst Andy Sim told The Business Times over the phone: "Even if the Uber and Lion City Holdings deal doesn't go through, but the combination of Uber and Grab does, the pressure on Comfort will cede."

That is a big "if". Competition authority CCS said on Monday, in response to BT queries, that it has not yet received a notification of the Grab-Uber deal "and is writing to the merging parties to clarify the details".

Singapore law prohibits mergers that may be expected to result in a substantial lessening of competition, a spokesman noted. The CCS has the power to order that the situation be remedied, such as requiring the merger to be unwound or modified.

Another effect of the war between Uber and Grab was a seemingly endless stream of commuter promotions, even as private-hire drivers were wooed with attractive incentives. These might evaporate - good news for taxi firms like ComfortDelGro.

"I can imagine that after the merger, most taxis will be running jobs received from the platforms with higher prices than the meter ones," said assistant professor Yang Nan, from the National University of Singapore Business School.

PhillipCapital investment analyst Richard Leow wrote in a March 22 report that, in a bull case for the land transport sector, there would be "more rational" fares and driver incentives, shifting some consumer demand back to taxis. But a bear case would give Grab a "monopoly" over the private-hire car industry here, putting it in a better position to fight with taxis, Mr Leow wrote.

OCBC Investment Research analyst Eugene Chua echoed these views as "two possible notable outcomes for ComfortDelGro".

"All said, we maintain our positive view on ComfortDelGro for now, with its more stabilised taxi business, coupled with limited downside as we continue to expect earnings to bottom out in FY18," Mr Chua added.

CGS-CIMB analysts Cezzanne See and Lim Siew Khee wrote in a report on Monday: "We are unsure if Grab will take over Lion City Rental's fleet as it already has its own assets plus access to third-party vehicles via existing partnerships."

Meanwhile, Prof Yang, from NUS, told BT: "I do not expect the (Grab-Uber) merger to go through in the first place. But if it did, Uber and ComfortDelGro must be disbanded to increase competitiveness of the on-demand transit market. Even then, I fear that this would not be sufficient to maintain a healthy competitiveness."

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