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SoftBank tells Uber to focus on US and Europe as deal closes

Technology sector

SoftBank tells Uber to focus on US and Europe as deal closes

Car-booking company’s biggest investor also says it needs to ‘restock human capital’

Rajeev Misra has signalled an end to Uber's 'everwhere, for everyone' strategy

Uber’s largest shareholder has called for the car-booking company to focus on recovering market share in the US and growing in key European markets, a strategy that would end the founders’ original vision of building a transport service “everywhere, for everyone”.

Rajeev Misra, a board director of Japanese technology conglomerate SoftBank — which became Uber’s biggest shareholder on Thursday, with the formal closing of a $9.3bn investment — told the Financial Times that the transportation group had a faster path to profitability if it returned to its core markets such as the US, Europe, Latin America and Australia.

Mr Misra, who will join Uber’s board as part of the deal, insisted that exiting unprofitable countries was not solely about cutting its losses, which hit $1.5bn in the third quarter of 2017, but that growth prospects were more promising in its core markets.

“This is a growth company, this is not just about them cutting their losses,” he said. “Who cares if they lost a billion more or half a billion less?”

Uber had already started to leave some of its biggest emerging markets towards the end of the tenure of Travis Kalanick, the company’s controversial chief executive who was ousted in June. It sold its China business to rival Didi Chuxing in 2016, and merged its Russia business with local technology group Yandex shortly after Mr Kalanick’s departure.

However, Uber is still locked in expensive wars of attrition in India with local rival Ola and in Southeast Asia with Grab, and lost market share in the US to rival Lyft last year. SoftBank is already a major investor in several of Uber’s competitors — holding a 20 per cent stake in Didi, and a 30 per cent share of Grab — and its backing of the US company will complete its collection of ride-hailing themed investments.

SoftBank’s backing triggers a range of governance changes at the company and will give Dara Khosrowshahi, Uber’s chief executive, more control as he tries to turn the company round. SoftBank owns 15 per cent of the company’s shares after the transaction, while a consortium of other investors bought 2.5 per cent in the same deal.

A key challenge for Uber will be to improve the company’s financial position ahead of an initial public offering expected by October 2019. Mr Khosrowshahi has said that a key goal for this year is for the company to demonstrate a path to profitability.

Uber chief executive Dara Khosrowshahi has a mandate to reform the company and the funds to make it happen © Bloomberg

While Uber’s business is growing fast — gross bookings grew 85 per cent last year to about $37bn, compared with $20bn in 2016 — its losses have also widened.

Mr Misra said the company should also revamp its Uber Eats food delivery business, which has been one of the company’s recent bright spots and has been expanding into new markets aggressively.

He added that the company needed to “restock human capital” following an exodus of much of its top leadership over the past 12 months.

“We’re proud to have SoftBank . . . and the entire consortium in the Uber family,” an Uber spokesman said in a statement. “This is a great outcome for our shareholders, employees and customers that strengthens Uber’s governance as we double down on our technology investments and continue to bring our services to more people in more places around the world.”

The closing of the deal marks the end of a seven-month process that was often fraught and seemed at risk of falling part. Its conclusion is a key part of Uber’s plan to move out from under the shadow of Mr Kalanick. Mr Kalanick sold $1.4bn worth of his shares as part of the transaction, which also reduced the influence of the company’s early investors.

Talks between SoftBank and venture capital firm Benchmark, a major Uber shareholder, started in June. But all discussions were put on hold over the summer when Uber was without a chief executive for more than two months.

The process resumed after Uber’s board appointed Mr Khosrowshahi as chief executive in September, although it was again delayed several times by the deep division on Uber’s board, which struggled to present a united front.

Arianna Huffington, the media entrepreneur and an Uber director, said the company saw SoftBank as a strategic partner.

“It was strategically very important for Uber to have SoftBank on the cap table in a significant way,” she said, referring to its investments in competitors.

“The deal would not have happened without Rajeev being able to see all the big, strategic reasons why that deal was important for the whole ride-sharing industry, and not being stopped by the internal drama, but always being able to navigate beyond it.”

* This article has been amended since original publication to correct the total value of the investment by SoftBank and a consortium of other investors

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