Yandex - Taxi Rides Drop; M&A Update

Yandex.Taxi has again recalled an FAS application to buy Vezet, which could be due to a technical issue but could indicate a possibility of the deal not going through. We see limited risk to Yandex from discussions between Citymobil and Gett about potential cooperation, as we would not expect this to significantly increase competition in the sector. Taxi rides dropped 51% and car sharing fell by 44% during the first five days of the quarantine in Moscow. We are closely watching developments in Russia to get more visibility on demand for shared transportation in 1H20 and to determine how long the quarantine and remote working might last in large cities. We reiterate our BUY recommendation on Yandex.> Yandex.Taxi recalls FAS application to acquire Vezet. This is the third time that Yandex has recalled its application. The first two times it resubmitted an altered application to the FAS (we understand that the FAS in Moscow is closed for the quarantine). Yandex.Taxi told Interfax that it is still interested in Vezet but wanted to focus on supporting its existing partners in an environment of falling demand. This could indicate a possibility of the deal not going through. First, the business environment has changed, so the deal price would need to be revised accordingly; second, the FAS has delayed approval since summer 2019, which might imply that obtaining FAS approval will be difficult and that Yandex may not interested in the deal with potential FAS stipulations. Last July, Yandex said it expected to close the deal by the end of 2019.> Citymobil and Gett discussing various forms of cooperation, including a potential merger. This is according to an article in RBC. We think the two companies complement each other, as Gett is focused on B2B and Citymobil on B2C. According to our December 2019 Ivanov survey, Gett's share among taxi app users in Moscow fell 4 pp y-o-y to 19%, while Citymobil's share rose 8 pp to 24%; Yandex.Taxi's share was up 1 pp to 95%. Outside of Moscow, the corresponding shares were 6%, 13% and 88%. Should some deal be confirmed, we think Yandex would face limited risks, as we would not expect competition to increase; even combined, both companies would be much smaller than Yandex.Taxi, which has a dominant position. > Taxi rides down 51% and car sharing down 44% during the first five days of the quarantine in Moscow. This is according to the transport department. Gett expects taxi demand in Moscow to drop 70-80%, based on its experience in Israel, which involved a total ban on people leaving home (already in Moscow) and fines for breaking this (not yet in Moscow). According to Vezet, in the week to March 25 (so even before the quarantine week), demand in Perm, Novosibirsk, Rostov, Saratov, Volgograd, Voronezh (all with populations above 1 mln) fell by 20% compared with the week ending March 4, while in Moscow and St Petersburg demand fell 30%. As a reminder, President Putin has declared the week beginning March 30 a non-working week, while quarantine measures have been announced in Moscow from March 28 to April 5.