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Uber Loses License To Operate In London, Again

IAM Newswire

In just two years, Uber Technologies Inc (NYSE: UBER) lost its license to operate in London due to a pattern of failures in both safety and security. London is one of Uber's most vital markets, sadly for its black cab drivers who even blocked streets as part of their protest, arguing their existence is harmed by an inferior service. London authorities revoked Uber's license, the second time in less than three years as the company failed to adequately verify drivers' identities and safeguard the service for passengers.

Key Market

Uber's rapid growth in London is often quoted as a successful expansion story. It supposedly has as much as 3.5 million regular users in London. But Uber is constantly dealing with frictions from the iconic black cab industry as well as regulators, putting in question the company's long-term future in the United Kingdom. And this latest decision could even impact the company's 2021 outlook. Consequently, its shares dropped after this "loss" at a record-low in pre-market trading, taking down nearly $2bn off the company market cap.

Competitors

As for London, Bolt and India's Ola who just got its licence to operate in London during summer are in the air and on the roads, using any opportunity to increase their market share. But it is its smaller but main US competitor Lyft Inc (NASDAQ: LYFT) that just got an upgrade from analysts on Monday due to competitive positioning.

While stock Uber's stock has slipped 9.6% over the past month, Lyft's stock rose 4.3%. And the company did achieve record revenue driven by both better than expected active rider growth and revenue per active rider in its second quarter, raising outlook for the whole 2019 fiscal year. And after beating both its top and bottom lines for its third quarter earnings $955.6 million in revenue, its stock price also rose despite losing $1.57 per share. The company again increased its full year outlook, this time in the range between $3.57 billion and $3.58 billion.

Despite its weak IPO debut in March, the company expects to achieve profitability by the last quarter of 2021 fiscal year. But Lyft just found a partner as its Israel-based rival Gett shut down its New York City ridesharing app Juno. With this strategic alliance, Lyft will not only get Gett's corporate rides in NYC, but this only leaves Uber and Via as established competitors, with opportunity to gain even more market share.

Juno provided 14 million rides in 2018 which is a tiny fraction of Lyft's 600 million rides so even if it takes over the whole base, it's not that of a big deal. But being able to scale up its service in New York that is biggest ridesharing market in the US is an entirely different story with a lot of potential! And more importantly, this only shows a continued pattern that Lyft is a preferred partner over Uber.

Being second is actually Lyft's advantage as many will choose it over Uber to avoid the giant to gain a monopolistic throne.

Outlook

Uber will appeal against the decision and will be able to continue operating in London in the meantime. And the process could take years. The global ride-hailing giant insists that it fundamentally changed its business over the last two years and that it is setting standards on safety. The company will also use facial recognition technology for its drivers. But, regulatory authorities don't think this is enough.

Whichever the outcome, Uber will not disappear from London's streets any time soon- so sorry, black cabs. But, as Lyft's path to profitability continues to clear up and with the uncertainty regarding its long-term future in a market that vital as London, Uber's top and bottom lines are surely in for some strong headwinds.

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