Uber Technologies has agreed to sell its Southeast Asian business to bigger regional rival Grab, the ride-hailing firms said on Monday, marking the U.S. company’s second retreat from an Asian market.

The industry’s first big consolidation in Southeast Asia, home to about 640 million people, puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet’s Google and China’s Tencent Holdings Ltd.

A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank Group Corp’s Vision Fund made a multibillion-dollar investment in Uber. SoftBank owns stakes in most major global ride services companies, and executives have indicated they favored consolidation.

SoftBank already had investments in Grab and India’s Ola, and Vision Fund Chief Executive Rajeev Misra had urged Uber to focus less on Asia and more on profitable markets such as Latin America, a person familiar with the matter said.

Grab President Ming Maa told Reuters that SoftBank CEO Masayoshi Son was “highly supportive” of the deal, which he called “a very independent decision by both” Grab and Uber.

Uber will take a 27.5 percent stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. Grab was last valued at $6 billion after a financing round in July.

“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said in a statement.

The Competition Commission of Singapore (CCS) said it has the mandate to review whether any mergers will result in a “substantial lessening of competition” and take any action to intervene in the deal, but it has yet to receive notice from the companies.

The deal will help bolster Grab’s meal-delivery service, which will merge with Uber Eats, compete with Go-Jek. Go-Jek has become a dominant player and powerful rival in Indonesia, the region’s biggest economy, and it has rapidly expanded beyond ride hailing to digital payments, food delivery and on-demand cleaning and massage.

Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.

Uber, which is preparing for a potential initial public offering in 2019, lost $4.5 billion last year and is facing fierce competition at home in the United States and across Asia, as well as a regulatory crackdown in Europe.

Uber invested $700 million in its Southeast Asia business.

Uber previously sold operations in China and Russia to local rivals under former CEO Travis Kalanick. The deal with Grab is the first operations sale by Khosrowshahi, who started in September.

More consolidation

But Uber’s CEO does not want to make these mergers a pattern, and said he has no plans to do another sale in which it consolidates its operations in exchange for a minority stake in a rival.

“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind…The answer is no,” Khosrowshahi said in a note to employees that was shared with Reuters. “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”

SoftBank is also an investor in India’s Ola, another competitive and costly market where rivals have heavily subsidized rides in an effort to gain market share. But a source familiar with Uber’s strategy said the company was going to step up its battle with Ola in India, where Uber has close to 60 percent of the market, by some estimates, but is losing money.

SoftBank’s Misra sees opportunities for mergers and joint ventures between SoftBank-backed ride-hailing companies, particularly for collaborating on research and development, but the investor would never get actively involved with management decisions, the person familiar with the matter said.

Uber includes the United States, Australia, New Zealand and Latin America among its core markets — regions where it has more than 50 percent market share and is profitable or sees a path to profitability.
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