Motorized Warfare

London Ban Shows Uber Is in Perpetual Battle

Acting like a pirate on the global seas has worked so far, but it comes with battle scars.
Photographer: Carl Court/Getty Images

"Move fast and break things" might just have broken. 

That's the well-worn unofficial motto of technology upstarts, those disrupters of the status quo like Uber Technologies Inc. that aim to move quickly to establish themselves, win over customers and ward off would-be competitors. Normally what breaks when tech upstarts move fast is the software code. No big deal. 

But the short life of Uber and other companies has taught us that sometimes the things that break are existing regulations, maybe laws and occasionally basic standards of human decency.

The thing is, Uber acting like a pirate on the global seas has worked. It's not a nice thing to say in polite company, but it's hard to imagine Uber would be a globe-trotting company valued at $68 billion (for now) if it had agreed to sit in meetings with city taxi commissioners and otherwise followed all the rules of the transportation industry as we knew it. 

High Stakes

Uber's status as the world's most valuable private technology company is imperiled by a year of scandal and permanent business challenges

Source: CB Insights

But now comes London, and perhaps the first sign that Uber's rabble-rousing in the name of transportation revolution has a significant financial consequence.

London's regulator said it wouldn't renew Uber's license to operate in the city because the company's "approach and conduct demonstrate a lack of corporate responsibility." Transport for London cited Uber's use of a software tool called "Greyball" intended to avoid regulators, and it faulted the company for not properly reporting crimes and obtaining medical certificates. 

Uber and its 40,000 drivers in London can continue to operate normally while the company appeals the license decision, but if Uber gets kicked out of London, it will leave a mark.

Uber London Limited, which is the U.K. entity covered by the ban, reported about 23.3 million British pounds ($34 million based on late 2015 currency rates) of revenue in 2015, according to the most recently available disclosures to the U.K. company register. For context, Bloomberg News has reported Uber's net revenue was $1.2 billion for the first three quarters of 2015.

Red Ink

Uber's revenue has been growing fast but its reported losses remain high

Source: Bloomberg News and other news reports

Note: Uber selectively reports its financial results. These losses likely don't reflect the company's bottom-line financial results.

These figures should be taken with a grain of salt because Uber is a private company, and all we have are glimmers of perhaps massaged financial statements. Still, using those financials as a rough guide, and if London after 2015 stayed a roughly similar share of Uber's total business, then the revoked license in the European city may put a few percentage points of the company's revenue in jeopardy.

That's not a disaster, but it's not inconsequential either, particularly as Uber has been forced to retreat from operations in China and Russia, and as rivals make it tough sledding for Uber in a growing number of its markets. London is also one of Uber's established operating areas, which means the company keeps a larger share of fares and is therefore more likely to make a profit than it does in places like India or Southeast Asia. (Uber's disclosures in the U.K. show its London operating company doubled profits in 2015.) 

Like in much of the world, Uber has had a disruptive impact in London, and it has won both fans and detractors. Uber swept into London offering more efficient and cheaper fares compared with the famous "black cab" taxis. Uber caught on. The number of licenses issued for black cabs shrank by 1.3 percent between 2013 and 2015, while the number of private-hire vehicle licenses for Uber and others climbed by 18 percent, according to U.K. government data. 

Taxi drivers protested first, but now it's Uber drivers themselves who are fed up as the supply glut forces them to work longer and longer to eke out a basic living. Last year, a court ruled Uber had to treat drivers like employees and not like a fleet of contractors who aren't paid regular salaries or benefits. That ruling, which Uber is also appealing, likewise could have a profound financial impact on the company.

Fights with regulators, drivers and the courts in London has become a near-constant boxing match for Uber. The company is going to win some of its regulatory, competitive and legal battles, but it will lose others. And beyond Europe, this year marked by Uber scandals, battle scars and tumult should prove that this state of affairs isn't temporary growing pains for the company. Scandal and war is the natural state of being Uber.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the authors of this story:
    Shira Ovide in New York at sovide@bloomberg.net
    Lionel Laurent in London at llaurent2@bloomberg.net

    To contact the editor responsible for this story:
    Daniel Niemi at dniemi1@bloomberg.net

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