A central narrative in this week’s blockbuster acquisition — Uber’s Southeast Asia operations by Singapore-based rival Grab — has been that of ‘retreat’. Headlines about the ride-hailing industry’s first big consolidation in the region harped on Uber’s ‘retreat’ from Southeast Asia as it relinquished both its ride sharing and food delivery operations in eight countries including Cambodia, Indonesia, Myanmar, Malaysia, the Philippines, Vietnam, Thailand and Singapore to its rival, Grab.

This comes on the heels of Uber selling off its China business to Didi Chuxing in 2016. Uber admitted the sale was motivated by its operations in China, which turned out to be unsustainable, hemorrhaged more than $2 billion in a grueling war of attrition with its local competitor in China.

However, is the latest handover really a retreat? Not entirely so. According to the terms of the acquisition, although not fully disclosed, Uber will get a 27.5% stake in Grab while Uber CEO Dara Khosrowshahi will join Grab’s board. Not only does this save Uber from another damaging price war, it also shoehorns Uber’s plans to hive off its Asian operations which, as Khosrowshahi stated in a conference in November last year, were unlikely to be “profitable any time soon”. At the same time, this deal helps Uber to retain a strategic foothold in the fast-growing South-East Asian ride-hailing market.

Uber experienced a tumultuous year in 2017; confronting regulatory challenges in London and the US and dealing with the fractious departure of co-founder and erstwhile ex-CEO Travis Kalanick, all while battling increasingly aggressive competition and reducing profit margins. In many ways, therefore, selling off unprofitable regional arms with high cash burn rates helps the company remain in reasonably attractive financial shape for its potential IPO in 2019.

For Grab, this represents an opportunity to expand its game beyond transport to food delivery, payments and financial services. As its media release noted, “Grab will integrate Uber’s ridesharing and food delivery business in the region into Grab’s existing multi-modal transportation and fintech platform. With the combined business, Grab will drive towards becoming the #1 online-to-offline (O2O) mobile platform in Southeast Asia and a major player in food delivery.”

The Uber-Grab deal will, of course, have a cascade effect on key stakeholders. First, Japan’s Softbank Group Corp emerges as kingmaker and the biggest beneficiary of this acquisition. A major investor in both Uber and in several of its rivals including Singapore’s Grab, China’s Didi Chuxing and India’s Ola, SoftBank is positioned to reap the spoils of having only one strong rider to back in the fiercely competitive and highly lucrative South-East Asian ride-hailing market.

While both Grab and Uber have said that the deal would help them serve consumers better, there are looming fears of a monopoly resulting in higher prices. Similarly, because of the larger pool of available drivers in the aftermath of the acquisition, there are anxieties about reduced incentives for drivers.

Could the regulators have pitched in? The jury is still out on this one. Regulators should, arguably, have raised some flags have when SoftBank acquired stakes in each of these companies. However, it is worth noting that Singapore’s competition watchdog Competition Commission of Singapore (CCS) has stated that it will study the deal, willing to take interim measures, if required, and will step in to revoke or alter the deal if it feels that a monopolistic situation is emerging that is hurting consumers and drivers.

Vivek Vaidya Snr Vice President, Mobility, Frost & Sullivan. He can be reached at vivekv@frost.com