Yandex.Taxi, the taxi service of Russian Internet giant Yandex, and Uber have agreed to merge their businesses in Russia and neighboring countries Azerbaijan, Armenia, Belarus, Georgia and Kazakhstan.
Should it receive regulatory approvals the transaction is scheduled for completion in late 2017, stated Yandex. [Update: the merger was cleared in Nov. 2017]
“This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business,” Pierre-Dimitri Gore-Coty, Uber’s chief for Europe, Middle East and Africa, said in a separate statement.
The deal may also appear as Uber’s second retreat from a major market globally. 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. The US giant needs to improve revenue, narrow losses and resolve its legal issues, notes Bloomberg.
As part of the deal, Uber and Yandex intend to invest $225 million and $100 million respectively, in the new entity, valuing it at $3.725 billion on a post-money basis. On a pro forma basis, Yandex will own 59.3% of the combined company, Uber will own 36.6%, and employees will own 4.1%. The two teams will be integrated with Tigran Khudaverdyan, the current Yandex.Taxi CEO, managing the new entity.
The combined company will cover 127 cities across the covered countries. The two services provided 35 million rides in the month of June, generating $130 million of gross bookings, according to Yandex.
“Seamless global roaming”
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.”
“This creates one of the most convenient ride-sharing roaming agreements in the world!” claims Khudaverdyan.
Meanwhile, the driver apps will be replaced by a unified platform, allowing drivers to receive orders both user apps. “This combined driver platform will significantly increase the number of available cars, reduce passenger wait time, and boost vehicle utilization,” expects Yandex. “Drivers will be able to perform more trips per hour while passengers will continue to enjoy affordable prices.”
The new company will also operate the UberEATS service in the region. “We will bring together the great international expertise of the UberEATS team and Yandex’s expertise in mapping and pedestrian navigation to improve on the logistical complexities of online food delivery,” Khudaverdyan stated.
Russian brains for next-gen transportation technologies
The merged entity will benefit from Yandex’s technology assets in the field of transportation, which are not negligible. Over the past decade Yandex — which started operating in the mid 1990s, even before the inception of Google in the USA — has developed advanced navigation and mapping technologies.
To make taxi drivers’ life easier, Yandex claims to have made “several significant leaps in our routing and ride-assignment algorithms” over the past year, having thus “significantly increased vehicle utilization.”
“For example, now, during rush hour, drivers can perform 30% more trips than before. Unifying our drivers platforms will create an even greater opportunity to improve the quality of our services and further boost vehicle utilization,” according to Khudaverdyan.
Last year the Russian company was reported to have built its Yandex.Navigator service into some Toyota and Honda cars, aiming to provide these and other car manufacturers with better-adapted products for the Russian market. Yandex also announced projects for the truck industry, including the development of AI assistants for drivers and of a driverless minibus shuttle.
Just weeks ago, Yandex.Taxi unveiled the prototype of an autonomous car project, presenting it as “a step towards a comprehensive set of driverless technologies for application across a wide range of industries.” The prototype incorporates Yandex proprietary technologies in the fields of mapping, real-time navigation, computer vision, object recognition, and others.
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.
