On Nov. 13, San Francisco-based Uber’s board approved a “multi-billion dollar” investment from Japanese internet group Softbank, which may invest up to $10 billion, Reuters reported.

The Masayoshi Son-led group is already the biggest investor in Ola, Uber’s Indian rival, with a stake of over 30%. It has participated in five funding rounds in the Bengaluru-based firm till now, according to data from Tracxn:

Date Investors Total round October 2014 Softbank, Tiger Global, Steadview Capital, Matrix Partners, MIT $210 million April 2015 Softbank, DST Global, Steadview, Tiger, Accel, GIC, others $400 million November 2015 Softbank, Tiger, DST, Baillie Gifford, Steadview, Didi Chuxing, others $500 million April 2017 Softbank $258 million October 2017 Softbank and Tencent $1.1 billion

So far, these investments were seen as part of an expanding war chest against Uber. But with Softbank becoming a common shareholder in both Uber and Ola, the ongoing fierce battle between the two cab-hailing companies may no longer make sense.

“Having the same large investor in both companies raises the possibility of M&A (mergers and acquisitions) activity here. It’s possible that Softbank could try and bring the two boards together to figure out a way to cooperate in India,” Kartik Hosanagar, a professor of technology and digital business at University of Pennsylvania’s Wharton School, told Quartz. He mentioned how Softbank tried to do the same with e-commerce players Snapdeal and Flipkart, albeit unsuccessfully. “The question here is whether Ola’s other investors want to continue taking on Uber in a potential bloodbath for both companies.”

Ola vs Uber: A brief history

With an estimated market size of $10 billion, the online ride-hailing industry has been one of the pillars of the technology startup boom in India. The sector is led by Ola and Uber, which together control around 90% of the market.

Since Uber’s entry in India in 2013, three years after Ola was founded, the two companies have fought for supremacy, splurging on deeply discounted rides and higher driver commissions. The battle has entered the courts, too. In June 2016, Ola filed a petition claiming Uber was flouting certain laws as it apparently had “scant respect and concern…for the law of the land.” More recently, Ola co-founder and CEO Bhavish Aggarwal reportedly backed Indiatech.org, an industry body set up by a bunch of Indian entrepreneurs seeking protectionist policies against “non-Indian” internet firms operating in the country.

But there’s been no clear winner yet, as Ola leads in some parameters and Uber in others. For instance, the Indian firm operates in 110 Indian cities and Uber in just 29. Yet, a report released in July by market intelligence firm KalaGato estimated that Uber had a 50% market share in the Indian market between January and June 2017, compared to Ola’s 44.2%.

What next?

While having Softbank as a common investor does not necessarily imply a future merger of Uber and Ola, it will create a monopolistic structure of sorts in the ride-hailing sector, according to Jaspal Singh, co-founder of research and advisory firm Valoriser Consultants. Softbank’s move will ensure that both companies shift the focus away from undercutting one another and instead work toward fostering profitable structures, he said.



After all, their balance sheets have been bleeding. For the year ended March 31, 2016, Ola reported a loss of Rs2,313 crore ($353 million), while Uber has sunk many billions of dollars globally. There are signs of a thaw, Singh argued, as the companies have already begun pulling back incentives and discounts in India.

“The market there (in India) is still in its infancy. Nearly 500 million (new internet users) are coming online now as the prices of smartphones and internet drop. Softbank is seeing great opportunities there and there is room for several ride-sharing companies. So this makes sense,” said Vivek Wadhwa, a fellow at Carnegie Mellon University.

For Softbank, an investment in Uber could be a well thought out hedging strategy. It also backs a number of Uber’s other rivals, including Grab in southeast Asia and 99 in Brazil. Softbank is “betting on all possible options,” Singh said. Backing Uber, he added, “clearly shows that Softbank is not sure who will be the winner.”

In the long-run, Indian consumers stand to gain. Flush with funds, Ola and Uber may well turn their attention to innovation instead of competing on prices, said Anindya Ghose, the Heinz Riehl professor of business at New York University. ”Net net, this investment will lead to a good outcome for consumers,” he said, “as it will force both players to pull up their socks, roll their sleeves, and revisit how they can improve the quality of their service in India.”