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The Federal Antimonopoly Service of the Russian Federation has approved the Yandex-Uber plan to merge their respective taxi service activity in the country.
To ensure fair competition, the antimonopoly authority has requested the companies to “provide users with the most complete and accessible information of the legal person carrying out the transportation, with the preservation of the history of trips,” and “not to limit the ability of partners, drivers and passengers to work with other taxi aggregators.”
In neighboring countries, which are also concerned by the merger plan, the Belarusian authorities have also approved the transaction, but the decision of the antimonopoly service of Kazakhstan is still pending.
Nevertheless, the parties intend to close the transaction in January 2018, according to Yandex.
A $3.7 billion company
As part of the deal, which was announced in July, Uber and Yandex are to invest $225 million and $100 million respectively, in the new entity, valuing it at $3.725 billion on a post-money basis. After these investments and possible adjustments at closing, Yandex will own 59.3% of the combined company, Uber will own 36.6%, and employees will own 4.1%.
Uber will also contribute its UberEATS business in the region to the new company, which will cover more than 100 cities across Russia.
In a practical perspective for end users, the Yandex.Taxi and the Uber apps will operate as before. Users of both apps will enjoy “seamless global roaming” across the two platforms: for example, “an Uber user arriving in Moscow from Paris will be able to order a Yandex.Taxi straight from their Uber app,” according to Yandex.
The two services provided 35 million rides in the month of June 2017, generating $130 million of gross bookings, according to Yandex.
The deal may appear as Uber’s second retreat from a major market globally, as the US giant needs to improve revenue and narrow losses. Last year, Uber left China in exchange for a 17.5% stake in rival Didi Chuxing, after losing more than $2 billion battling its competitor.
A competitive market
The size of the Russian taxi market is subject to various estimates, from $3-4 billion (Gett), to more than $8.4 billion last year (VTB Capital data cited by Yandex). Informal rides by “gypsy cabs” account for an additional volume of some $1.9 billion, believe government experts cited by Yandex.
Uber arrived in Russia in 2013, but began developing there actively only in 2015. While visiting Moscow two years later, its Vice President Ryan Graves underlined the importance of Russia in Uber’s strategy.
Yandex.Taxi was not the only competitor of the US giant on the Russian market. Gett, a global player launched in Israel in 2011, covered nearly 70 Russian cities as of late 2016.
In September 2016, the company announced a $100 million investment plan until the end of 2017 to cover new Russian cities, aiming to control 50% of the Russian market. Two months later, the company received a $100 million loan facility from Sberbank — which is a partner of Uber and even one of its shareholders via Sberbank’s venture arm SBT Venture Capital.
Smaller players are also in the running. One of them, the taxi service Takeit, received $2 million from Russian business angels in early 2016.
Traditional taxi booking services should be mentioned too. Maxim, a leading player, operates in more than 130 Russian cities, according to media reports.