07/13/2017, Thu, 13:32, Moscow time , Text: Igor Korolev

Yandex has agreed to merge its taxi service with Uber. The united company will be controlled by Yandex and $325 million will be invested in it.

"Yandex" creates a joint venture with Uber

The Yandex company has agreed to merge the Yandex.Taxi service with Uber. The partnership will work in Russia, as well as in Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan.

Uber will invest $225 million in the combined company, Yandex - $100 million. Control in the new structure will belong to Yandex - it will have 59.3%. 36.6% of the shares will be owned by Uber. Another 4.1% will be owned by the company's employees.

What will the combined company look like?

The united company will be headed by the CEO of Yandex.Taxi Tigran Khudaverdyan. According to a press release, the new company will use Yandex's technologies and knowledge in the field of mapping and navigation services and search engines and Uber's global track record as the world's leading online travel booking service.

This will create an even more dynamic and sustainable business that meets all the needs of users and drivers, and also helps to develop the transport infrastructure of cities and regions.

In the united taxi of "Yandex" and Uber the controlling stake will be received by "Yandex"

After the deal is closed, both apps for ordering rides, Yandex.Taxi and Uber, will continue to be available to users. At the same time, taxi fleets and drivers will switch to a single technological platform. As stated in the press release, this will increase the number of cars available for order fulfillment, reduce the time for their delivery, reduce idle mileage, increase the reliability and availability of the service as a whole.

The transaction is expected to be completed in the fourth quarter of 2017. As part of the agreement, Yandex.Taxi agreed on roaming with Uber. Now tourists from Russia will be able to call a taxi abroad using the Yandex.Taxi application, and cars from Yandex.Taxi will be available to tourists from abroad using the Uber application. Uber's food delivery service, UberEats, will also be part of the partnership.

Chinese variant

Interestingly, a year earlier, in August 2016, Uber did in China by being taken over by local taxi startup Didi Chuxing.

Didi Chuxing is China's largest taxi ordering service headquartered in Beijing. According to Reuters, the share of the service in the taxi ordering services market in China is 55%. Uber co-founder Travis Kalanick(Travis Kalanick) in 2016 estimated the share of his company in the Chinese market at 30-35%.

The cost of the joint venture between Uber and Didi Chuxing was supposed to be about $35 billion. Uber China investors received a 20% stake in Didi. The Uber brand itself continued its presence in the Chinese market after the deal, and Didi Chuxing was supposed to invest $1 billion in the development of Uber in the US.

Taxi market estimates

According to VTB-Capital, the legal taxi market in Russia in 2016 amounted to 501 billion rubles. At the same time, according to the estimates of the Analytical Center under the Government, the gray taxi market amounted to 116 billion rubles. Thus, the share of the combined company in terms of revenue in 2016 would be 5-6% of the entire market.

Possible reasons for the merger

A source in the taxi market sees several reasons for Uber to merge with Yandex.Taxi. “Essentially, Uber invented the “bombed” market for the European Union and the United States, but in Russia it has existed for years. Besides, in Russian Uber one has to face various problems: claims from the Federal Antimonopoly Service and Roskomnadzor, requirements to work exclusively with licensed drivers, etc. For this reason, it was not easy for Uber to work in Russia.”

Due to the news about the merger of taxi services "Yandex" and Uber, "Yandex" shares reached an all-time high

In addition, partners need to join forces to advance in the regions. In Moscow, Yandex.Taxi is the leader in terms of the number of trips, Gett is in second place, and Uber is third. At the same time, in the whole country, the leaders are the services "Maxim", "Vezet" and Rutaxi, the source of CNews notes.

The combined company will have access to the combined capital, which will strengthen marketing promotion and offer various digital services. But whether tariffs will be reduced is a question, because such a step will require support from the drivers themselves, adds the source of the publication. Yandex did not comment on the issue of changes in the tariff policy.

Shares of "Yandex" reached a historical maximum

Immediately after the announcement of the creation of a joint company with Uber, Yandex shares began to rise in price.

By 14:00 Moscow time on July 13, 2017, their growth was 18%, and the price reached $27.72 on the Nasdaq exchange and 1.95 thousand rubles. on the Moscow Exchange, which, according to Vesti.Ekonomika, has become a historical maximum share price in the history of the company.

Toward evening, trading in Yandex shares on the Moscow Exchange was transferred to a special regime due to growth of more than 20%. Shares Yandex N.V. on the Nasdaq in New York rose by almost 16.5% compared to the previous reporting period and are traded at $31.83 per share. At the same time, the growth of securities quotes reached 18.7%, TASS notes.

A joint venture with Yandex to order a taxi in Russia has so far brought Uber only losses. The companies merged at the beginning of last year, but instead of making a profit, the transport giant missed $42 million. Why the Russian-American taxi service did not live up to the hopes of investors and passengers, 360 understood.

The American company Uber Technologies reported its earnings for 2018. According to tax records, she earned $11.3 billion, and net profit amounted to 997 million dollars. At the same time, the operating expenses of the taxi aggregator increased by 8% compared to the previous year - up to three billion dollars.

One of these cost items was cooperation with the Russian partner Yandex.Taxi for the corporation. For the year, Uber made a net loss of $42 million after merging with Yandex. Currently, the American transport giant owns 38% in the enterprise. Under the terms of the deal, Uber has no right to sell its shares in the joint company without the consent of the Russian partner until 2021. Also, until 2025, the American company is prohibited from competing with Yandex in the CIS and opening its own taxi service.

The choice of these dates is not accidental, analysts interviewed by 360 explain. With the current traffic volumes and integration with other services, for example, Yandex.Food, the company will only be profitable by 2021, Timur Nigmatullin, an analyst at the market analysis department of Otkritie Broker JSC, believes. “Despite all the efforts of top management, the service still does not bring profit to its owners. Last year alone, its net loss exceeded 4.4 billion rubles. In fact, the company with a revenue of 19 billion rubles continues to be unprofitable, ”the source of 360 notes.

Meanwhile, the analyst does not exclude that in the next couple of years, the affairs of the joint Russian-American offspring will go uphill. “In the fourth quarter of last year, Yandex.Taxi showed a loss of only 129 million rubles. I do not rule out that in the first quarter of this year it will go to zero and show profit this summer or autumn. The merger with Uber has radically reduced competition in the taxi market in Russia. In addition, the adaptive period is over, so shareholders will soon begin to receive dividends from investments,” Nigmatullin is sure, emphasizing that a change in management strategy will help improve the company's performance.

The point is that in terms of corporate governance Uber also has a number of restrictions. For example, the Americans do not have a controlling influence on the board of directors, that is, Yandex can make key decisions without the consent of its overseas partners. In addition, the company is not represented in the management of the combined entity and is not involved in the day-to-day management of the field business.

Market for two

Photo source: RIA Novosti

Uber and Yandex.Taxi created a joint taxi ordering company in Russia and the CIS back in February 2018. Under the terms of the merger, passengers continued to order taxis in each of the applications, although drivers received orders through a single platform. Passengers can use taxi services not only on the territory of the Russian Federation, but also in Belarus, Kazakhstan, Georgia, Azerbaijan and Armenia.

As told "360" in the press service of the company, on this moment Uber Russia became available in 150 regions of Russia. “Investments in Uber Russia, including discounts for users, motivational programs for drivers and advertising, will exceed two billion rubles in 2019,” the representative explained, declining to provide information on the financial statements of the joint venture with Uber.

At the time of closing Uber deals and Yandex invested $225 million and $100 million respectively in the project. In addition, Uber management issued two million of its shares to Yandex at a price of $26 a share. At the same time, a year later, the Americans were obliged to buy back these securities at twice the price - at $48 per share. As a result, Yandex can receive about $96 million in profit.

Despite the losses, the gap with Yandex is unprofitable for Uber, market participants surveyed by 360 are sure. According to the president of the Moscow Transport Union, Yuri Sveshnikov, Uber still does not have the tools to implement commercial transportation. “Initially, Uber was conceived as an intermediary between drivers and passengers and did not charge a significant fee for their pimping. Now, with the help of a commercial structure represented by Yandex American company has become a full-fledged taxi aggregator and is unlikely to give up such a status, at least in Russia, ”the source of 360 believes.

Timur Nigmatullin also speaks about the low probability of decay. According to him, in the event of disintegration, the two aggregators will enter into competition with each other, which will result in even greater losses for both. “Trying to get as many customers as possible, they will be forced to cut prices and carry passengers at a loss. Such a scenario is good for passengers, but not for companies,” the analyst concluded.

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I found out how all this will work and who will benefit from the merger of the two market giants.

What are the conditions for joining?

The parties have already disclosed the financial part of the issue. Uber will invest in new company 225 million dollars and will receive 36.6 percent of the shares, "Yandex" - 100 million dollars for 59.3 percent of the shares. estimated at $3.7 billion, it will operate in six countries and 127 cities, making 35 million trips worth 7.9 billion rubles. Yandex will also develop the UberEATS food delivery business based on Yandex.Maps walking routes.

What was the market like before the merger?

According to Lenta.ru sources, in 2016 Yandex.Taxi drivers made more than 16 million trips per month, more than 500,000 trips per day. Uber, the second in the market, had 4.8 million trips per month, or 160,000 per day, while Gett, which closed the top three, had 4.3 million trips per month, or 143,000 per day.

Photo: Evgeny Pavlenko / Kommersant

In the same year, experts from the analytical center estimated the total volume of the legal taxi market at 441 billion rubles, and illegal taxis at 116 billion rubles. According to them, 338,000 taxi drivers are constantly working in Russia, and the number of issued licenses exceeds 457,000.

There are over 47,000 licenses in Moscow, and over 105,000 in the Moscow region. This is due to the fact that today licenses in the capital are issued only to yellow cars, and in the Moscow region the official color of a taxi is white, that is, the car does not need to be repainted or pasted over with a film.

Most of the cars belong to taxi companies, and Yandex.Taxi, Uber and Gett act as order aggregators, that is, a more advanced analogue of dispatching. For using their system, they charge taxi companies a monthly commission and take 15-20 percent from each trip. Taxi companies themselves earn by renting cars, receiving up to 2 thousand rubles from taxi drivers daily.

The average revenue of a taxi driver in Moscow is 7.3 thousand rubles a day, in St. Petersburg - 6 thousand rubles, in million-plus cities - 3.5 thousand rubles. Most drivers are registered as individual entrepreneurs and are not officially on the staff of taxi companies from which cars are rented.

What changes await drivers

Uber and Yandex.Taxi will unite the databases of drivers, in addition, they will use the maps and algorithms for distributing Yandex orders. In theory, it will become easier for taxi drivers to navigate the city, since the Yandex navigator is objectively better than the service used in the Uber app. The combined base (again in theory) will increase the number of free cars, which will reduce the time of filing and reduce the cost of travel.

However, the taxi drivers themselves are not very happy about this. Said, the driver of Yandex.Taxi, told Lente.ru that the abundance of free cars will increase competition, but reduce the workload of drivers. This means fewer trips. “This is all, of course, very cool, but I pay 1,850 rubles a day for a rented Ford Focus. And also gasoline - the car "eats" 10 liters per 100 kilometers, which is 370-400 rubles. Plus a commission of 800 rubles - formally it is paid by the taxi company, but in fact I am. The average order I have now is 300 rubles, I make 15 such orders. So consider how much I will earn, ”he complains.

Photo: Anton Belitsky / Kommersant

Uber driver Alexey agrees with him. “You can’t work without a license now, plus soon we will be completely bent over with color, in Moscow all cars must be yellow, and pasting over with a film even on an acquaintance costs 30-40 thousand. Yes, now we will fight for every order, passengers will surely like it. But we will definitely be able to raise less money, and migrants will squeeze us out. They are ready to plow on speeds [amphetamines] for 20 hours, but we are not. Although where you go, you have to, ”he says.

Aleksey also noted that drivers would most likely start working part-time as a private driver. “You step into the night and stand at points where there are a lot of people. It is often possible to negotiate for cash. And in the morning you are already taking orders from Uber. True, for this you have to have your own car, in the taxi fleet they will quickly cut through that you are shaking for days, and will not allow you to constantly go on a flight, ”sums up the taxi driver.

Will passengers like the changes?

In theory, the combination of driver databases and a single navigation from Yandex will increase the speed of car delivery and allow taxi drivers to better navigate cities. “This is very important, because 80 percent of drivers are from the CIS,” explains a Lenta.ru source in one of the taxi services.

On the other hand, the price war between Yandex.Taxi and Uber, which irritated taxi drivers, but users really liked, will end. Both companies constantly dumped and introduced new options: in February they set fixed prices, and in April Yandex.Taxi supported Uber's announced price cuts of 10-50 percent.

Photo: Alexander Koryakov / Kommersant

At the same time, in order to save income, both companies introduced the so-called zones of high demand, where, depending on the time of day and the workload of drivers, the cost of the trip increased. True, this led to the fact that during peak hours, tariffs soared by 200 percent, and in case of bad weather, a 15-minute route cost a conditional 800 rubles.

Nevertheless, the unification of Yandex.Taxi and Uber is unlikely to reduce the cost of travel. On the contrary, the combined company will actually become a monopolist in the market, which means that it will not only be able to dictate pricing policy, but also not to take into account the opinion of taxi drivers, who, due to the increased number of free drivers, will have no choice but to accept the new rules of the game.

This means that passengers will continue to be transported, including taxi drivers who do not know the city, but work for 20 hours and receive a penny for this. Only the price for their services is likely to increase, because now the union of Yandex.Taxi and Uber need not be afraid that their orders will be picked up by drivers of a competing service.

The global services Uber and Yandex.Taxi have created a joint company in Russia, which will also operate in the markets of Kazakhstan, Armenia, Azerbaijan, Georgia and Belarus. The name of the new association is NewCo, the company will be registered in the Netherlands.

A package of 59.3% in NewCo went to Yandex, 36.6% to Uber, another 4.1% to employees. Under the terms of the agreement, the parties agreed to invest $100 million and $225 million respectively in the company. The world media called the agreement the departure of Uber from Russia and other CIS markets (except Ukraine). The price of Yandex shares on the Moscow Stock Exchange hit a historic high yesterday. The fortune of businessman Arkady Volozh, one of the co-owners of Yandex, grew by $200 million in one day.

Why did the deal happen? The agreement can be called the final chord in the fierce competition that Uber faces in the course of its active external expansion, in particular in Russia, world media write. The Yandex.Taxi service began operating in the Russian Federation in 2011, Uber - two years later. The latter developed quite aggressively, its share in 2016 was Russian market was about 18%, twice as high as a year earlier.

But Yandex is still ahead: it has 30%, and also doubles in a year. The volume of the taxi market in the Russian Federation in 2016 was estimated at about $ 9 billion, and recently it has been growing rapidly thanks to these two companies. There are not so many players on the market anymore - in April, large taxi aggregator services Fasten and RuTaxi announced the merger.

In addition to this tandem, as well as Uber and Yandex, a notable company is the Gett service, there are also smaller services - Maxim, Vazi and others. With the advent of Uber, competitors could not avoid a price war, and the reduction in the cost of trips led to a cooling of interest in this business on the part of drivers. Experts are sure that consolidation is overdue. “The Yandex.Taxi company set the goal of a large placement of shares, so it was necessary to gather the maximum audience at any cost. It is clear that in this price war, sooner or later, someone had to run out of money,” said Daniil Vakhovsky, marketing director of the Ukrainian service Uklon.

Who earned more? Uber does not disclose its revenue and profit data for individual countries, in 2016 the global company received $ 2.8 billion in losses. "Yandex.Taxi" in the Russian Federation was also unprofitable - $ 35 million loss in 2016. The service planned to make a profit only by 2021. In April, the Russian Kommersant wrote that Yandex.Taxi issued a mandate to JP Morgan to search for an investor with the intention of raising about $150-200 million for development, possibly in exchange for a stake of 13-17%.

One of the publication's sources suggested that the company needs funds for acquisitions on the eve of the expected market consolidation. "With this agreement, Yandex eliminates an aggressive competitor, which will ultimately lead to improved monetization and profitability," Sergey Libin, an analyst at Raiffeisenbank, told Reuters. Others add that the economics of the Uber project made it impossible to continue to subsidize trips given a small market share. Whereas the organic growth of the company is already on the verge of exhaustion, and it would be more difficult to increase further.

Why Uber is investing more money but gets fewer shares? The contributions were calculated based on the valuation of the companies made during the preparation of the agreement, says Chief Specialist for analytics and strategy of Mail.Ru Group Alexander Gorny. Uber didn't get much, and the company added more money to increase its stake. But still not enough money to make it 50%. Yandex was indeed significantly larger in all respects,” says Gorny.

“The Yandex.Taxi business in the region is larger than the Uber business, so it is logical that Yandex's share in the new company is larger. We consider the agreement very beneficial for us,” commented Uber.

Uber has profit problems in other markets as well. Why is he leaving Russia? While such a move is indeed rare for a company that is still expanding its geography more often than narrowing it down, this happened to Uber not only in Russia. Last year Chinese company Uber China has teamed up with local rival Didi Chuxing. It was the latter company that became the platform for the unification. Prior to this, Uber had spent billions of dollars on subsidies for local drivers and still could not withstand a tough price war.

After the merger, he received a 17.5% stake in the joint venture, which corresponds to about $ 8 billion. At the same time, the company does continue to suffer losses in India and Southeast Asia, writes Bloomberg. The agency's analysts predict that the agreement in Russia will be a precursor to further consolidation processes in this part of the world, including in large emerging markets.

So what will both companies get in the end? First of all, mutual access to markets and capital. Today Uber is available in 16 cities of Russia, Yandex.Taxi - in 126 cities and six countries. Accordingly, as a result of the deal, Uber will gain access to all other cities in Russia, Armenia, and Georgia. Whereas Yandex.Taxi automatically enters the Azerbaijani market, where Uber operates. According to the Russian RBC, before the agreement, the daily number of taxi rides from Yandex was 500,000, from Uber - 160,000 (the combined Fasten service, according to the company itself, has 1.5 million trips per day).

Now the former competitors from the new tandem expect to serve 35 million trips together, total cost which will amount to about $135 million. That is, in terms of revenue, the total share of NewCo in the market will be about 16%. The tandem participants themselves estimate the value of the new company at $3.73 billion. It will work on the same technology platform, but both applications will still be available to users.

Will taxi prices go up now? Analysts disagree. Some believe that yes, since it is precisely the cessation of price dumping that is one of the goals of the association. Others are sure that prices will remain the same as long as there is still competition, and perhaps the market will continue to grow. The founder of the Gett service, Dave Weiser, has already predicted that prices will rise, and the margins of this business in Russia will stabilize. Representatives of the new company themselves assure that there are no plans to revise tariffs yet. In any case, the agreement will still be carefully studied by the antimonopoly authorities, which must give their opinion within 30 days.

And what about Uber in Ukraine, why didn’t the company enter into the agreement? Most likely, because of the political risks that the Yandex brand bears in Ukraine. “In Ukraine, the Yandex and Yandex.Taxi companies are under sanctions in accordance with the order of the president and the decision of the National Security and Defense Council,” recalls Daniil Vakhovsky. At the same time, he suggests that the deal could also include Ukrainian business, but without advertising it.

“It is quite possible, because the agreement has not yet been closed, its details have not been made public, which means that we may not know everything,” he says. Is such a consolidation of the taxi market in Ukraine possible in the near future? Not likely, says the expert.

“Firstly, because all players in Ukraine are quite independent, and secondly, because our market is in a much less adequate state in terms of regulation than in Russia. There, after all, it is more civilized and orderly,” Vakhovsky believes. The press service of Uber previously reported that Ukraine is not part of the agreement with Yandex. But they added that because of her, Uber abandons its previously announced plans to open a central office in Kyiv to work in the CIS.

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The largest players in the passenger transportation market in Russia, Uber and Yandex, have teamed up. The decision to merge was made back in 2017, but the final merger took place only on June 14, 2018. The leadership set itself an ambitious goal: to create a "personal public transport" that could become an affordable alternative to buses, subways or a private car. But what were the real consequences for passengers and drivers?

Conditions and purposes of association

The volume of investments invested in the association and amounted to 100 and 225 million dollars, respectively. Most of the shares (59.3%) were absorbed by Yandex, another 36.6% were bought by Uber, and the remaining 4.1% were divided among the employees of the combined company following the transaction.

For the passenger transportation market

The passenger transportation market in Russia is undergoing significant changes. almost completely replaced the classic taxi companies. The competition is getting fiercer, and when two large companies unite with each other, it becomes even more difficult to compete with them.

It should be noted that earlier in Russia there were several more companies operating in the field of passenger transportation, including with the help of mobile applications merged their services. So, as a result of the merger of RuTaxi, the taxi "Vezet", "Leader", "Saturn" and RedTaxi, a new major player in the market was formed - the operator Fasten Russia. According to analysts, it accounts for approximately 12.3% of all taxi orders in Russia (at the end of 2017). In the same 2017, the combined share of Yandex and Uber absorbed 10.4% of the market. After uniting by joint forces, the companies will be able to provide about a fifth of the orders in the passenger transportation market. In large cities, this figure can become even higher.

A photo. Key Market Stakeholders (Research Conducted by analytical center under the government of the Russian Federation).