Yandex.Taxi and Uber join forces in six CIS countries

Yandex.Taxi and Uber join forces in six CIS countries
Yandex.Taxi has from the start been the biggest online taxi service in Russia.
By bne IntelliNews July 13, 2017

Russia’s premier online taxi service Yandex.Taxi has joined forces with local rival Uber to jointly offer their service in six countries of the Commonwealth of Independent States (CIS), reports Vedomosti.

The parent company Yandex, the leading Russian search engine and one of Europe’s most valuable internet companies, agreed with Uber, which has been operating in Russia for several years already, to combine their businesses offering on-line request for travel and create a new company, according to a blog posted by Yandex. 

The combined company will operate in Russia, as well as in Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan. 

The companies agreed that Yandex and Uber will invest $225mn and $100mn in the new company respectively, giving it an estimated $3.725bn valuation.

The shareholding will be based on the value of investment and leave Yandex with 59.3% of the joint venture company and Uber owning 36.6%, with the employees owning the remaining 4.1%, according to a joint press release. 

Tigran Tigran Khudaverdyan, General Director of Yandex.Taxi,  said that the companies want to build together a "personal public transport" - an alternative to the private car, bus or subway.

Based on June figures, the combined platform will cover 127 cities in six countries on both services and serve 35mn trips per month with a total value of RUB7.9bn ($132mn).

The online taxi-providing service has been booming and competition has become stiff, with the number of taxis on the road likely to be limited soon. The City of Moscow has been incrementally introducing tougher regulations to discourage gypsy cabs as Mayor Sergei Sobyanin tries to move Moscow slowly towards a taxi system similar to other European capitals. However,  he has not banned gypsy cabs yet – which would be hugely unpopular – because it continues to act as a social support for many Russians and immigrants at the bottom of the income ladder.

As such, a licensing system has been introduced for taxis, but it is still not rigorously enforced. To get a licence you need little more than a yellow car and a photo (there is no fee). Nevertheless, the fines for driving without a taxi licence have risen slowly but steadily from a few hundred rubles ($10) to several thousand rubles ($100) recently.

The number of registered drivers has climbed steadily from 10,000  in 2011 to about 55,000 today. Most European cities limit the number of taxi licences in order to ensure that drivers can earn a decent living. The same idea has been floated in Moscow and city hall suggested that 55,000 registered drivers was a maximum, but so far the local government has yet to formally cap the number of licences issued and continues to hand them out to anyone that asks for one.  The main effect of the licensing system is that the notorious traffic police (know as GAIishniki in Russia) have used the licenses (or lack there or) as a way of extracting more bribes for immigrants moonlighting as taxi drivers.

"Until 2010, stopping gypsy cabs in the street was still huge," Grigoriy Dergachev,  head of development for Yandex.Taxi, told bne IntelliNews in the company's first exclusive interview with the Western press in 2014. "The problem was official taxis could cost up to RUB1000 ($30) and they took at least an hour to arrive. From the north of the south of Moscow is a 30-40km drive and you had long traffic jams in between. People in a restaurant or bar in the middle of December didn't want to wait that long so they went and flagged a car down on the street. With Yandex.Taxi usually a customer doesn't have to wait for more than five to seven minutes for a car to arrive," says Dergachev. "It's a revolution!"

Yandex.Taxi has from the start been the  biggest online taxi service in Russia. There is some competition from the Israeli-backed GetTaxi, which in September 2014 took in fresh capital from Russia's leading private equity investors Barings Vostok Capital Management.  Uber entered Russia in 2014 and began a price war, offering  minimum fares of RUB200 ($3.32) – half Yandex's minimum.