JAKARTA - Ride-hailing company Gojek, arch rival of Singapore-based Grab, has announced a merger with Jakarta-based Tokopedia, Indonesia's largest e-commerce company by value of transactions.

Gojek has expanded into offering other services such as digital payment and food deliveries.

Gojek's Andre Soelistyo will lead the combined business as GoTo Group CEO, with Tokopedia's Patrick Cao serving as GoTo Group President, said a joint statement issued on Monday (May 17).

"We have Gojek's high volume, high frequency mobility transactions, combined with Tokopedia's high value, medium frequency e-commerce transactions. GoTo Group will account for more than two per cent of GDP in Indonesia," said Mr Cao.

The merged entity, called GoTo, had a combined gross transaction value of over US$22 billion (S$29.4 billion) in 2020. It has over two million ride-hailing drivers and more than 11 million merchants.

Cut-throat competition in the digital business in Indonesia has intensified in the areas of food delivery, e-commerce and payment services, which are dominated by three groups of players led by Gojek, Grab and Shopee. The latter two are Singapore based.

Finding strategic partners have been among the noticeable features of the competition between the three. Tokopedia has long been a partner of Grab's digital payment arm OVO.

The merger of Tokopedia with Gojek, which operates digital payment service GoPay, is likely to affect the Tokopedia-OVO partnership, said observers.

GoPay was the dominant player before Grab's OVO caught up by investing heavily not only in major cities, but also in smaller towns and regencies.

The latter sealed an early deal with Alfamart, a local convenience store chain that now boasts 15,000 outlets across the archipelago. But Gojek later offered a more attractive deal to Alfamart, which led to the end of the OVO-Alfamart partnership.