The tone of Uber’s reply to Transport for London’s (TfL) decision to revoke its London operating licence was perhaps most striking for its humility. CEO Dara Khosrowshahi has hardly had the time to get his feet under his desk, having taken up his new position less than a month ago, when he faced the prospect of a suspension of operations in his largest European market, and one of the few where the loss-making ride-hailing giant is making a profit.
But whatever the merits of TfL’s case for revoking the licence, Khosrowshahi’s straight up “I apologise for the mistakes we have made” is a significant departure from the management style of his combative predecessor, ex-CEO and founder Travis Kalanick.
Khosrowshahi’s conciliatory stance, and the way that both he and TfL approach upcoming negotiations over Uber’s appeal, could mark an important turning point in Uber’s relationship with regulators around the world. And, considering the ongoing battles with Kalanick at the company’s board level, London could present him with an opportunity to establish his authority at Uber by starting to repair the company’s tarnished reputation.
London Politics at Play
TfL’s decision does look political. It gave an official reason of “potential public safety and security implications” for the revocation but other issues, some strictly speaking outside of its remit, must have come into play. Uber’s avoidance of VAT, by routing bookings through a Dutch company, the employment status of drivers, including a 25% rate of commission that drivers pay to Uber compared with 10-15% in the US, and the alleged use of its illegal “Greyball” software to evade regulators were undoubtedly factors. London’s 3.5m Uber users are well aware of its gaming of the system – why else are the fares so cheap – but safety is a real enough concern for TfL to start an argument.
And the argument has certainly started. Close to 900,000 Londoners have signed a petition supporting Uber, and even UK Prime Minister Theresa May has called the action “disproportionate.” TfL, who have been caught between intense lobbying by London’s politically influential black cabs and the popularity of the ride-hailing service, had previously seen discussions with Uber as a “closed door”, and on-going court cases have not helped. Under the aggressive and belligerent Kalanick, this situation would probably have escalated into a war of words and further court cases.
But this time, Khosrowshahi quickly accepted an invitation from London Mayor Sadiq Khan to come to London, and he is due in on Tuesday for talks with TfL’s management. Khan has already given Uber’s new boss the right hints as to how the talks should proceed: “I want disruptive technology coming to London, but you’ve got to play by the rules.”
This should all be music to Khosrowshahi’s ears. He has come in with a remit to reform Uber’s corporate culture and image, which has been dogged by harassment allegations, a reputation for an “arrogant” corporate attitude and running battles with regulators over everything from failures to report sexual assaults to the illegal use of software to gain an unfair competitive advantage. London is a significant enough market for him to make his mark, and TfL’s actions provide him with a catalyst to push through changes at the company.
Uber’s shareholders would probably agree. It may be coincidental that the influential Japanese technology giant Softbank, who are weighing up a $10bn investment into Uber, have this week publicly backed shareholders Benchmark Capital and Goldman Sachs in their attempts to reduce Kalanick’s shareholder control, effectively blocking him from taking up a CEO or chairman role again. But the timing is uncanny, and Uber’s problems in London are symptomatic of its controversies elsewhere.
Time to Play by the Rules
Uber is as popular in London as it is in many other cities around the world. The company has brought down the cost of taxi services, and hailing an Uber on a mobile device has become fundamental to the transport choices of millions of people. But the disruption that it has brought to London’s transportation system was bound to butt up against regulators, incumbents and public opinion. Londoners want Uber and the disruptive competition it represents, but they also value safety and a level playing field for this competition to play out. And London’s black cabs may be expensive and a little traditional for the tastes of some, but they do provide a high-quality alternative that is also integral to London’s tourist scene.
TfL’s move should be looked at as a blessing in disguise for Uber, and Khosrowshahi’s conciliatory stance looks like the right approach. Employment rights, taxation, safety and consumer choice have become focus issues both in London and around the world as the “gig” economy and new business models emerge. Politicians are sharpening their pencils to introduce tougher regulations, and Travis Kalanick-style stonewalling and arrogance will not work now that Uber has become so big, and dominant, in so many major cities. Uber will need to learn how to play by the rules and if Khosrowshahi plays his cards skillfully, it can help regulators set a new rulebook for the urban transport services of the future.
It is a normal part of any cycle that new disruptors push the envelope and game the system as they grow their business to a commanding market position. But now that Uber is in that position, it will need to reel back some of its sharp practices and will face regulators and politicians whose instincts are to reel them back too far. But maybe London, with a history of reasonable market legislation, and Dara Khosrowshahi, with his reputation for integrity and diplomacy, will be able to strike a right balance to serve as a model for Uber’s regulatory issues in other cities.
Whatsapp Launches New Venture Aimed at Businesses
Whatsapp has launched a new app targeted at businesses, called the Whatsapp Business App, which they claim will enable companies to “communicate more efficiently” with present and potential customers.
This forms part of Whatsapp’s wider strategy to branch out into the corporate world. It plans to use the app to generate new revenue by charging businesses for using the extra communication tools that will enable them to better connect with their customers.
Although the app is set for worldwide release, at present it will only be available in Indonesia, Italy, Mexico, the UK and US. It includes a feature which indicates a business is authentic with a green tick badge next to their name.
Amex: Troubled Credit Card Company Reports $1.2bn Net Loss
On Thursday, American Express, or Amex, reported a net loss of $1,197m in the fourth quarter, the first net loss the company has experienced for 26 years.
Although the company stated that revenue from interest expenses was up 10% to $8.8bn, Amex said recent reforms to the US tax code meant the company incurred extra costs, including a repatriation cost on its foreign assets as well as a devaluation of its deferred tax assets. It estimates total costs amounted to $2.6m.
For the full year, net income was $2.7bn compared with $5.4bn the company earned in 2017. However, even with the estimated $2.6m the company claims it incurred from the recent tax charge, net earnings were still $5.3bn, $100m lower compared to last year.
In New York, American Express shares (AXP) took a near 1% tumble at the beginning of trade with shares finishing the day on $99.90. JPMorgan Chase and Goldman Sachs anticipate greater earnings for 2018.
“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express” said CEO and chairman Kenneth Chenault. Chenault also said he will be leaving Amex in “very strong hands” when his successor, Steve Squeri takes over next month.
American Express has suffered from an ever-reducing share in the credit card market and ended its 14-year relationship with American warehouse chain Costco who in 2016 made an agreement with the market leader, Visa.
Tencent Extends Facebook Lead
Tencent has shot past Facebook to become the world’s most valuable social network.
Editor’s Remarks: Although Tencent briefly overtook Facebook in terms of market cap in November, the recent selloff of Facebook shares prompted the Chinese tech titan to regain the lead. Facebook investors responded negatively to news that Mark Zuckerberg’s plans to highlight family and friend-based content on the newsfeed would reduce the amount of time people spent on the site. Shares in Facebook have fallen 5% since that announcement, enabling Tencent to gain a $19bn lead over the US company. Tencent’s growth has been spurred on by its diversification away from its flagship messaging app, WeChat, and into video games.
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