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NEWS ANALYSIS

Uber-Deliveroo deal: Singapore deja vu for ridehailing giant?

Will it start a costly fight with GrabFood, or will it pull Deliveroo out of the market where it appears to be leader?

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The Uber-Deliveroo deal unveiled on Friday could present Uber with a dilemma in South-east Asia, where Uber owns a nearly 30 per cent stake in Grab (which runs GrabFood, a Deliveroo rival), and where Deliveroo is said to be the market leader in food delivery in Singapore.

Singapore

THE Uber-Deliveroo deal unveiled on Friday could present Uber with a dilemma in South-east Asia, where Uber owns a nearly 30 per cent stake in Grab (which runs GrabFood, a Deliveroo rival), and where Deliveroo is said to be the market leader in food delivery in Singapore.

On Friday, Uber is said to be in early talks to buy Deliveroo for more than US$2 billion in a major attempt to dominate the food delivery business in Europe.

One thing is clear. If Uber does acquire Deliveroo, the result is a formidable food delivery team. The merged entity will enjoy the expertise of Uber Eats - Uber's food delivery arm which offers not just logistic solutions but business insights to restaurant partners - and the networks of Deliveroo, which operates in more than 500 cities and towns in 13 markets.

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Should Uber take over the operations of Deliveroo Singapore, it will be back in business in Singapore - just not as a ride-hailing platform but a food delivery player. The Uber-Deliveroo entity will compete with other players here, including GrabFood, honestbee and Berlin-based foodpanda.

Uber's dilemma is clear: to go head to head with GrabFood, which is operated by a company it partially owns; or to pull Deliveroo out of Singapore (like it did with Uber Eats upon the Grab-Uber merger), which means to cede market leadership to foodpanda or even GrabFood.

It is a tricky situation. If Uber-Deliveroo takes on GrabFood, Uber is back to square one - embroiled in a costly war with Grab, its arch-rival in South-east Asia. If Uber-Deliveroo exits Singapore, it will lose the major market share that Deliveroo has expensively and painstakingly secured.

Uber finds itself in this quandary because it decided in March to withdraw its ride-hailing and food delivery operations from South-east Asia, where it is bleeding from intense competition with Grab and Go-Jek, to prepare for a listing in 2019.

In a shock deal, Grab bought Uber's South-east Asia business for an undisclosed sum and a 27.5 per cent stake in Grab. It also acquired Uber Eats, which gave it a leg-up in launching its own food delivery arm, GrabFood, in Singapore and the region.

A major reason for Uber's exit from the region, including Singapore, was to staunch the bleeding.

But in the crowded Singapore food delivery market, Deliveroo seems to be headed for profitability. It appears to be the market leader with 6,000 delivery riders and 4,000 restaurant partners. From 2016 to 2017, its revenue more than doubled from S$11.5 million to S$26.4 million, while net loss narrowed from S$16.9 million to S$546,626, going by BizFile data. The London-headquartered company - which launched in Singapore (currently its only South-east Asian city) in 2015 - has raised US$859.6 million in funding and is said to be valued at more than US$2 billion. If it closes this deal with Uber, Deliveroo will enjoy Uber's funding war chest of over US$22 billion and reported valuation of over US$70 billion.

In comparison, foodpanda has 3,000 riders and over 4,000 restaurant partners. While its revenue steadily increased from S$50,252 in 2012 to S$20.8 million in 2016, its net loss came up to S$17.6 million in 2016, compared to S$10.1 million in 2015 and S$3.1 million in 2014. Foodpanda is owned by Frankfurt-listed food delivery firm Delivery Hero. Singapore-based Honestbee, which delivers groceries as well as food, has over 100,000 merchant partners and 20,000 riders across seven Asian countries. It recorded S$1.5 million in revenue in 2015, up from S$2,970 in 2014. Its net loss was S$6.7 million in 2015, versus S$565,101 in 2014. Launched in 2014, honestbee has since raised some US$15 million in funding.

A honestbee spokesman said: "We welcome any new additions to the growing array of food delivery options in the market, but what we're really focusing on right now is continuously improving our services."

Uber, Deliveroo, Grab and foodpanda have declined to comment on the deal.