February 5, 2018 / 3:30 AM / 18 days ago

BREAKINGVIEWS-Ola puts SoftBank in back seat with overseas drive

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Una Galani

MUMBAI, Feb 5 (Reuters Breakingviews) - Ola is making it clear SoftBank is a backseat driver. The loss-making Indian ride-hailing outfit already dominates at home and is now eyeing a slice of the profitable Australian market, namely in Sydney, Melbourne, and Perth. The intrusion into one of Uber’s strongholds shows the limited clout Masayoshi Son’s Japanese group has as a minority investor in both sides.

Ola is unusual amongst its startup compatriots in venturing abroad. But clear regulations remove uncertainty over ride-hailing in Australia. It is a rich market with higher margins, so success could generate cash to fund expansion elsewhere. And the country boasts a large Indian diaspora that Ola can target.

The Bengaluru-based start-up, founded by Bhavish Aggarwal and Ankit Bhati, might also be able to import some of the tactics it used to thrive in India. There it offers a wider range of rides than Uber, from basic auto rickshaw rides to high-end cars with tablets that let riders watch films. Other distinguishing features include a members’ service with cars on priority and no surge-pricing, and an in-app mobile wallet.

Yet an entry Down Under, hot on the heels of Estonia’s Taxify, will require an initial splurge on subsidies to win market share. Ola counts Tencent, Microsoft, and China’s Didi Chuxing as backers alongside SoftBank, which is the largest with a quarter of the company.

SoftBank has stayed silent on Ola’s plans. But it is hard to believe the telecoms and technology giant would support a move that puts its two investees in a head-to-head fight when Ola made a net loss of 17.6 billion rupees ($274 million) for the year to March 2016, the most recent period for which financial results are available. SoftBank and its Vision Fund division, which has nearly $100 billion to invest, now own stakes in almost all the major taxi app companies. Part of the idea is presumably to put a stop to ruinous competition.

Ola’s success in growing its footprint in India means it is often touted as a buyer for Uber’s local operations, just as Didi bought out Uber China. Ola’s Australian move is a bargaining chip it could use with Uber to speed this process up.

On Twitter twitter.com/ugalani

CONTEXT NEWS

- Indian ride-hailing company Ola on Jan. 30 said it plans to enter Australia, in its first push abroad.

- Ola is looking for car owners and drivers to work with it in Sydney, Melbourne and Perth, and plans to start commercial operations in Australia in early 2018, it said in a statement.

- Japan’s SoftBank is the biggest investor in both Ola and Uber, which compete in India. Ola has a majority of India’s ride-hailing market, with operations in more than 110 cities.

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Editing by Quentin Webb and Sharon Lam

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