Strategy and Monopoly: Uber Buys Major Rival Careem, Dominating the Middle-Eastern Ride-Sharing Market

Strategy and Monopoly: Uber Buys Major Rival Careem, Dominating the Middle-Eastern Ride-Sharing Market

In the world where the surplus of cars has caused massive problems in traffic control and management, the rise of the ride-sharing economy has provided a reprieve to commuters everywhere. In this world, Uber has established itself as a household name. Known for its efficiency and customizability, commuters now have the capability to book a ride without the worries of lining up or waiting for the next vacant taxi. In turn, drivers and car owners have gained the opportunity to earn money while driving to their destination. Ride-sharing has revolutionized the landscape of the daily commute.

Of course, multiple corporations want to jump on this opportunity, penetrating the market with their own brand of ride-sharing. In the Middle East, a ride-sharing company known as Careem has been the constant rival of Uber in gaining the interest of Middle Eastern commuters. However, Uber has recently announced the $3.1 billion purchase of its long-term rival.

Expansion

Operating in 98 cities in 14 countries, Careem has access to markets that Uber currently does not operate in. Iraq and Morocco, for example, are countries whose ride-sharing market Uber has not penetrated as of now. With this purchase, Uber now has access to countries which have preferred the use of Careem over them. This union grants Uber the significant foothold it needs to dominate the Middle Eastern market.

Originally introduced in 2012 as a ride-sharing rival to Uber, Careem quickly grew in popularity due to the additional features it integrated into the app. Food and package delivery, and financial transactions between users allowed Careem to gain a following of its own within the Middle East.

Uber states that it will acquire Careem’s mobility, delivery, and payment businesses across the greater Middle East region, which ranges from Morocco to Pakistan.

Incoming rivals

This purchase is also a strategic move for Uber in strengthening their hold on the Middle Eastern market as well. Western ride-sharing companies such as Lyft has expressed their interest in expanding within the area. By merging with its major competitor in the Middle East, Uber is able to strengthen its consumer base before other companies infiltrate the market.

The price that Uber paid to purchase Careem was also considerably higher than the latter’s reported net-worth. In a report last year, Careem’s net-worth was said to be at around $2 billion, after raising $200 million worth of funding. This purchase was also reported to be the highest recorded purchase of a ride-sharing startup, being included as one of the largest payments for a ride-sharing company worldwide.

Joining forces

Heads of both Uber and Careem have stated that the latter corporation will continue to function as a separate app, with the board of directors containing representatives from both companies. Uber CEO Dana Khosrowshahi expressed that the union signifies the want to establish a stronger foundation, given that the terms agreed upon will allow innovations and new ideas to exist across not one, but two well-established brands.

The integration of the two corporations will happen slowly over time, allowing the users of both apps to experience a smooth transition as the brands combine. The combination also allows for greater efficiency in implementing changes that will benefit not just the company, but the commuters who avail of their services as well.

Regulatory approval is still needed in order for the acquisition to push through. With a deal that is composed of $1.4 billion in cash and $1.7 billion in notes, Khosrowshahi believes that the process will go smoothly and expects it to be complete by early 2020.

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