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GoTo merger boosts RI's digital economy
Gojek, Tokopedia establish new US$18 billion group
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he recent merger between Gojek and Tokopedia is expected to consolidate their positions as major players in Southeast Asia’s digital economy amid rising competition, particularly from Singapore-based companies, that led the two to lose ground in recent years, even in their home turf of Indonesia.
Jakarta-based ride-hailing company Gojek and e-commerce platform Tokopedia, both of which are unicorns, announced their merger on Monday with the establishment of GoTo Group, the country’s biggest start-up in terms of valuation at an estimated US$18 billion.
The merger enables GoTo to better compete with the likes of Singapore-based ride-hailing giant Grab, worth an estimated $14.3 billion, and Singapore’s SEA Limited, the publicly listed parent company for e-marketplace Shopee, which is worth $112.59 billion by market cap.
Furthermore, GoTo is reportedly planning to conduct an initial public offering (IPO). A listing of the combined businesses could raise as much as $2 billion, two sources told Reuters, in what would be one of the biggest IPOs ever by an Indonesian company.
“The vision is for GoTo to be as big an entity as SEA Group,” Institute for Development of Economics and Finance (Indef) economist Nailul Huda told The Jakarta Post in a phone call on Monday.
Read also: Gojek in talks with Tokopedia for $18b merger: Bloomberg News
Competition is tightening in Southeast Asia, a digital economy expected to grow threefold over a five-year period to $309 billion by 2025, according to the “e-Conomy SEA 2020” report by Google, Temasek and Bain & Co.
Even though Indonesia is the region’s biggest digital economy, with a forecast size of $124 billion by 2025, the country stands second place to Singapore in terms of attracting investment to its digital economy.
The island nation attracted $7.1 billion in investments in 2019, compared to Indonesia, which attracted $3.2 billion the same year, according to the report, such that Singaporean companies have been able to gain ground against Gojek and Tokopedia in Indonesia.
A case in point, Shopee and its e-wallet counterpart ShopeePay has dominated Indonesia’s e-commerce market since 2019 fueled by aggressive discount and cashback marketing strategies paid for by SEA Group.
Meanwhile, a survey by market research firm Ipsos shows that ShopeePay's user penetration was highest among other e-wallets in Indonesia at 48 percent, followed by OVO (46 percent), GoPay (35 percent), DANA (26 percent) and LinkAja.
Read also: Shopee reigns over Indonesia’s e-wallet market with price cuts, good looks
Funding is key to GoTo’s ability to grow in the region as the group plans to expand its e-commerce, on-demand and financial services not only in Indonesia but also in other regional markets with Gojek’s presence: Thailand, Singapore and Vietnam.
GoTo has even established a new financial arm, GoTo Financial, which will take over e-wallet GoPay and other financial services offered by the two companies.
“The speed at which GoTo can raise new funds will be crucial to the competition,” Nailul added.
Gojek most recently received $300 million funding from telco company Telkomsel, while Tokopedia managed to bag an undisclosed amount of funding from tech giants Google and Temasek.
Read also: Gojek, Tokopedia secure funds, vote of confidence from big firms
Nailul added that, aside from SEA Group and GoTo Group, the close relationship between Grab and Indonesian tech and media firm Emtek Group, would make up Indonesia’s top three competing tech companies.
Grab, which backed Indonesia’s e-wallet OVO, reportedly bought a 4 percent stake in Emtek Group shares last month, according to The Straits Times. The group funded mobile wallet platform DANA. The buy-in signals that their digital payment firms may be merged.
Center for Indonesian Policy Studies (CIPS) researcher Ajisatria Suleiman said that such an IPO would become both an exit strategy for GoTo’s investors and a means to fund GoTo’s business expansion.
“If the funding mostly goes to founders and investors, they can re-invest the money to other start-ups, benefiting the larger start-up ecosystem,” he said in an interview. “But if the funding is mostly used for business expansion, GoTo’s operations will benefit greatly.”
Meanwhile, Indonesian E-commerce Association (IdEA) chairman Bima Laga said the Gojek-Tokopedia merger would push the e-commerce market into growth and maturity.
“The number of [e-commerce] players might decline but there will be higher quality players. This shows the digital market maturity,” he said in a text message, adding that GoTo Group could still capture around 80 percent of Indonesia’s inactive online shoppers.
-- Vincent Fabian Thomas contributed to the story.
