SINGAPORE – The potential US$7 billion (S$9.5 billion) merger between Singapore-based ride-hailing giant Grab and Indonesian rival GoTo would help both companies boost market share, but analysts doubt regulators will green-light the mega deal.
They told The Straits Times the planned merger, which comes amid intensifying competition in South-east Asia’s ride-hailing and food delivery markets, would enable the combined entity to reduce costs, achieve economies of scale and strengthen its market position.
But they also warned that the deal is unlikely to be approved by competition watchdogs, given the strong market positions of both Grab and GoTo in South-east Asia.
GoTo operates Gojek, a similar ride-hailing and food delivery platform.
Bloomberg Intelligence analyst Nathan Naidu said Grab and GoTo accounted for over 70 per cent of South-east Asia’s ride-hailing gross merchandise value (GMV) in 2023 and around 60 per cent of the region’s food delivery market.
GMV is the total value of goods and services sold through companies over a period of time.
“Should the two companies merge, the resulting entity would effectively control a 60 to 70 per cent share of the South-east Asian on-demand services market,” Mr Naidu noted.
“However, the likelihood of regulators approving the merger between both companies is low due to possible concerns over potential monopolistic behaviour, given that both Grab and GoTo are leading players in South-east Asia’s on-demand services sector.”
A Feb 4 report by Bloomberg said talks between Grab and GoTo have intensified in recent weeks, with both parties keen on completing the deal in 2025. Both Grab and GoTo declined to comment when contacted by ST.
The move comes as South-east Asia’s ride-hailing market is set to expand, with revenue projected to reach US$11.53 billion by 2029, according to data from Statista.
The number of ride-hailing users is also expected to grow, reaching 218.5 million by the same year.
Grab, a Nasdaq-listed company, posted a US$15 million profit in the third quarter of the 2024 financial year, reversing a US$99 million loss a year earlier. Revenue rose 17 per cent year on year to US$716 million.
Meanwhile, GoTo cut its losses by 29 per cent to 1.7 trillion rupiah (S$140 million) in the third quarter ended Sept 30, 2024, from 2.4 trillion rupiah a year earlier, as revenue grew 8 per cent to 3.9 trillion rupiah.
Mr Nirgunan Tiruchelvam, head of consumer and internet at investment advisory firm Aletheia Capital, said the merger would help Grab and GoTo achieve economies of scale in South-east Asia, especially given that their financial performance has been inconsistent in recent years.
“The deal, if successful, will help provide a sense of scale for both companies in a region with a population of 650 million people. With overlapping and, hence, lower costs, the combined entity will be able to generate better cash flow,” he added.
But regulatory hurdles, including competition laws in Singapore and Indonesia, may complicate the deal, Mr Tiruchelvam added.
“There is a risk that any competition watchdog, either in Singapore or Indonesia, will think that the deal would lead to the lessening of competition, given Grab’s dominant market share in both countries,” he noted.
Grab had announced plans to acquire Singapore taxi operator Trans-Cab in July 2023, but the Competition and Consumer Commission of Singapore (CCCS) raised concerns about the deal in October that year and later suggested that Grab and Trans-Cab propose solutions to address competition issues.
The deal collapsed in July 2024, with both companies announcing that they would not be proceeding with the acquisition.
Grab was also reportedly in talks to acquire the whole or part of the business of foodpanda operator Delivery Hero in South-east Asia, including Singapore. The CCCS had also launched a probe into the potential deal before it was abandoned in February 2024.
Mr Gavin Chia, chief executive of digital brokerage Moomoo, noted that these deals were “pretty much localised in Singapore”, but the potential one between Grab and GoTo is on a much larger scale, involving multiple industries like ride-hailing, food delivery and fintech across the entire South-east Asian region.
“They are completely different scenarios. It remains to be seen if regulators across the region can come together to ensure fair play and a level playing ground for new entrants to the market,” he said.
Mr Chia added that the merger between the two companies makes sense, as there are multiple players vying for market share in the region, making it a challenge to maintain profitability.
“Both Grab and GoTo have a combined value of over US$25 billion. There is an incentive to merge and consolidate their market share,” he said.
Mr Chia also pointed out that while Grab could lower fares to compete with rivals like GoTo, a price war would be unsustainable as recovering losses from undercutting competitors could take years.
This, he said, makes the potential merger between Grab and GoTo a more logical move. “It’s an ‘if you can’t beat them, join hands with them’ scenario.”
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