Sea's move into food delivery and financial services in Indonesia threatens its regional rivals

Singapore

IN FRONT of an open-air Jakarta restaurant, delivery drivers clad in the orange colours of South-east Asia tech group Sea wait for orders next to the green-jacketed riders of market leaders Gojek and Grab, in what has become the latest battleground for tech supremacy in the region.

The humble noodles eatery signed up for Sea's nascent ShopeeFood service a month ago, but "immediately, there were orders every day", said manager M A Rasyid.

Riding on the success of a cash-generating gaming business, US-listed Sea has invested heavily in its Shopee e-commerce brand and successfully taken on Alibaba's Lazada and other rivals in recent years. Its share price has risen five-fold over the past year, giving the firm a market capitalisation of US$111 billion.

Now Singapore-based Sea is muscling into food delivery and financial services in Indonesia, posing a new threat to regional rivals including ride-hailing and delivery unicorns Grab and GoJek. At stake is a slice of the more than 400 million Internet users in South-east Asia's digital economy, which is estimated to triple to US$309 billion by 2025, according to a study by Google, Temasek and Bain & Company.

Tech giants including Tencent - a major investor in Sea - Alibaba, Google and SoftBank Group are big backers of South-east Asia's Internet champions. Sources say Sea's aggressive expansion is one of the key sources driving merger discussions between Gojek and e-commerce platform Tokopedia. The two Indonesian firms aim to create an US$18 billion powerhouse to fight off Sea and regional ride-hailing leader Grab.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Meanwhile, Grab and other players, including travel app Traveloka and Indonesian e-commerce unicorn Bukalapak, are rushing for public listings, hoping to ride the coattails of Sea's stock rally while defending their turf.

"Sea is like Thanos, massive and powerful, and able to take down half of the world, or in this case half the start-ups," Willson Cuaca, co-founder of East Ventures and an early backer of Tokopedia, joked as he compared the group to the powerful villain in the Marvel film series. "Like the Avengers, companies need to band together if they want to ensure their survival and to win the war."

Sea's stock rally reflects a scarcity of options for investors seeking exposure to the booming South-east Asia Internet sector. It went public in 2017 and has raised about US$7 billion in share and debt sales, with early investor Tencent now holding about 20 per cent of the stock.

That investor appetite, combined with a need to raise cash to match Sea's muscle, is forcing rivals to seek public listings as quickly as they can, bankers and executives familiar with the matter say.

Sources say the Gojek-Tokopedia merger, which is likely to be finalised within weeks, will be followed by a listing in Jakarta in the second half of 2021, then a mega IPO in the United States targeted for 2022.

Grab and Traveloka, for their part, are looking at speeding up the process by merging with special purpose acquisition companies, sources said. Bukalapak is planning the same, after a 2021 Jakarta IPO.

Sea's success owes much to its online gaming business Garena, whose 2017 title Free Fire became the most downloaded game in the world over the past two years. It is using the cash from Garena to repeat its success in e-commerce, food delivery and financial services.

Its Shopee division started off in 2015 as a platform for local sellers and soon gained traction with many merchants regionally. It has now overtaken both Lazada as the top e-commerce player in the region and Tokopedia as the leader in Indonesia, thanks in part to innovations such as adding social features to its service.

Both Gojek and Grab, which have pursued on-again, off-again merger talks with each other for years, believe they can ward off Sea's move into food delivery thanks to well-honed logistics networks and early-mover advantages.

But they could be hard-pressed to match Sea's subsidiaries: In Vietnam, Sea-owned food delivery service Now quietly dominates the sector, according to a January report by advisory firm Momentum Works.

In Indonesia, ShopeeFood is wooing vendors by touting its 80 million-strong user base and promising to subsidise steep discounting.

The next showdown will be in financial services. Sea has bought Indonesian lender Bank BKE and has hired a veteran of China's peer-to-peer platforms to head its "SeaMoney" banking efforts.

Sea and Grab are set to square off in Singapore, where both won coveted digital bank licences last December. Grab is backed by many investors including SoftBank Group and Mitsubishi UFJ Financial Group. REUTERS