TikTok and GoTo team up in Indonesia, threatening Southeast Asia.

As the combined force of Tokopedia and TikTok in Indonesia increases, analysts say Shopee, the e-commerce arm of Sea Limited, may face “greater pressure.”

The two companies announced on Monday that they are entering into a “mutually beneficial strategic partnership” in Indonesia that will serve micro-, small-, and medium-sized business merchants, which comprise over 90% of them.

GoTo is a result of the merger between Gojek, Indonesia’s largest ride-hailing company, and Tokopedia, the country’s largest e-commerce platform.

Morningstar’s Kai Wang, a senior equity analyst, wrote in a Monday note that the deal may also put greater pressure on Shopee, which is struggling to maintain profitability.

Sea’s U.S.-listed shares closed Monday at $37.87, down 5.33%. As the company focused on growth rather than profit to defend market share, it posted a net loss of $143.9 million in the third quarter, down from a net income of $331 million the quarter before.

As part of the deal, Tokopedia and TikTok Shop Indonesia will merge into an enlarged Tokopedia entity, in which TikTok will hold 75.01% of the company. The company will receive $1.5 billion over time from TikTok.

In a joint statement, the two companies said that the enlarged entity would operate and maintain the shopping features within the TikTok app in Indonesia.

The company has essentially given up its direct presence in e-commerce and transferred it over to TikTok for a minority stake. This is what the market didn’t like,” said Garre. “The reality is that the market expected GoTo to be able to monetize [Tokopedia] in the future.”

Earlier this month, Indonesia banned e-commerce on social media platforms in an effort to protect domestic merchants, forcing TikTok to halt its e-commerce service TikTok Shop as a result.