On July 13, Yandex and Uber announced the merger of their taxi business in Russia and a number of neighboring countries. Shares of Yandex after that rose by 25%, and Uber customers began to be frightened by the inevitable increase in tariffs. How justified are fears and optimism about this deal and what does it mean for the market?

In recent years, the Russian and especially the Moscow taxi market has undergone significant changes. First, the professional shop of taxi drivers pushed the network taxi RuTaxi, "Maxim", "Saturn". An important change in the regulation of the market occurred in early 2012: a new law was introduced that significantly reduced the requirements for taxi drivers. Thus, the restriction was removed from the supply in the transportation market, from which drivers previously extracted their high margins. In the race immediately joined online aggregators "Yandex.Taxi" and Gett Taxi, concentrated primarily on the rich Moscow region. The emergence of the global aggregator Uber in November 2013 and its desire to win market share launched a spiral of price wars between the participants.

Actually, seizing the market at a loss to oneself due to lower prices and subsidizing trips from shareholders' money was a strategy that allowed Uber to grow into the largest US carrier and exported around the world. Russia was no exception: from the very beginning, Uber began dumping, reducing the minimum prices and tariffs per kilometer. In the price war, it was necessary to get involved in other competitors, especially Yandex.Taxi. Expenses aggregators in this situation were cut at the expense of numerous owners of cars and drivers ready to work for the wages of a low-skilled worker. As a result, to the current merger, the companies came up with "drought-dry" taxi parks working for 12-14 hours by taxi drivers - and still negative profit: the first quarter of 2017 for Yandex.Taxi became the sixth unprofitable contract, and the global expansion of Uber for 2016 The year brought him $ 2.8 billion in losses with revenue of $ 6.5 billion. Under such conditions, it is natural that the unified businesses will begin to direct their orders in the market, seeking at least to pay off - to raise prices, increase volumes, and increase efficiency.

However, it seems to me that it will be very, very difficult to do this, so that passengers are unlikely to be afraid of immediate significant tariff increases, although steps to reduce costs will certainly be made.

As a result of the described transformations in the market of Moscow taxis in recent years, a structure with several large participants-aggregators competing for the price has formed. A similar structure, for comparison, the mobile market. Prices in such markets tend to stay at the same level due to either an obvious collusion or understanding of the consequences of competition: a price reduction by one participant with high mobility of buyers and agents (drivers) will lead to lower prices and other participants to retain their positions. In the end, all will remain on average with their own, but with a smaller margin - which is good for customers, but bad for aggregators. In the long term, the balance of power is influenced by qualitative factors - the ability of companies to develop and optimize processes and costs. However, for a new entrant who was once Uber, price competition is the only way to quickly capture a significant market share, and its entry has hit the profits of the entire sector.

What can a united player do in this situation? If you think about it, not too much. First, the new consolidated business is not so great: according to RBC, "Yandex.Taxi" in 2016 carried out about 500 000 traffic per day, Uber and Gett - about 150 000. None of the companies is not included even in the first Three of the Russian aggregators: "Lucky", "Saturn" and "Maxim" in 2016 together made about 4 million traffic per day, according to Rusbase (2.5-3 million according to RBC estimates). Moreover, in April "Lucky" and Saturn announced the merger of business with the participation of UFG Private Equity, and now there are rumors about their negotiations with Gett.

Secondly, even strong positions in some regions - and Yandex.Taxi before the merger occupied about half of the Moscow market - will not allow monopolizing the market and dictating its terms. To raise prices alone is very difficult because of the market structure: the outflow of buyers to cheaper competitors will begin, the market share will drop. In the absence of barriers, competitors can easily transfer resources from other regions to the Moscow market. If suddenly companies manage to come to an agreement and raise prices, such a market will always be an attractive target for competitors from the USA, China, India, and also the "gray" private car.

Thirdly, even a possible collusion with enlarged competitors will not give the new company full market power. The growth in the volume of the market in recent years was caused precisely by the fall in prices - only in Moscow in 2016 the number of trips, according to the calculations of the Department of Transport, grew 2.2 times. A significant increase in prices will return most of the passengers back to public and personal transport.

So, in the near future, despite the consolidation of companies in the market, it is difficult to expect a significant increase in prices, although the retreat of Uber, apparently, marks the end of aggressive expansion and price wars. Most likely, if the active struggle for the market is over, the companies will cancel a number of discounts and promotions for new customers. Historically, Yandex has proved to be a more rational player: after the initial period of attracting partner companies by a 1% commission, Yandex quickly increased it to 10% at the expense of drivers and taxis. Therefore, for Yandex, this deal is also probably less important than the market believes.

The merger of Uber and Yandex.Taxi is not a unique case. This is part of the Uber strategy for cost management, announced last year, and involves a move away from unconfined markets. The company's losses are growing along with revenues, seizing markets outside the US is not easy - competitors already know what to expect from Uber's entrance to the market, and are worthy of price wars. As a result, Uber sold in the summer of 2016 its own $ 1 billion-a-year Chinese business to the local aggregator Didi Chuxing, which brought its share in the domestic market from 80% to 90%. The company is not too successful in India either. So, we can hardly expect that this deal will become a springboard for Yandex in a joint business with Uber.

Super profits from the domestic market, too, should not be expected, thanks to the state in which it drove Uber. So, the growth of Yandex shares by 25% on news about the merger seems excessive emotional reaction of the market. In the long term, the technological solutions of Yandex can allow them to gradually increase market share due to the quality of services and additional options. But the company's expertise in this sector is very limited, even the software for managing the taxi fleet Yandex has not been developed by itself, but bought with RosInfoTech. And then he will have to compete with other technology companies. Uber perfectly coped with the role of Atilla, destroying the old forms of the market and the margin of a narrow range of licensed carriers around the world, but so far nothing has worked on it. Time will tell if he will be able to create his empire on these wreckages, or, like the first railway companies, he will burst, but leave behind a new market structure. What's nice, in any case, consumers will benefit.