CMA revises provisional findings in Hitachi's rail signalling takeover

(Sharecast News) - The Competition and Markets Authority (CMA) issued a revised assessment over Hitachi's planned €1.7bn rail signalling acquisition on Wednesday, of the Ground Transportation (GTS) segment of Thales. Earlier in June, the competition regulator highlighted potential competition issues surrounding the proposed merger in relation to digital mainline and urban signalling rail systems.

At the time, it initiated a consultation during which it invited feedback and continued its information gathering process.

Following a comprehensive analysis of new evidence and previously-collected data, the CMA inquiry group said it now believed that the merger would not lead to a significant reduction in competition in the provision of communications-based train control (CBTC) signalling systems in the UK.

However, it maintained its initial position that the takeover could result in decreased competition in the digital mainline signalling sector.

Transport for London (TfL), which manages the London Underground, is the primary customer of CBTC signalling systems in the UK, with Thales and Siemens its current providers, and Hitachi yet to supply the Tube.

The CMA said its evaluation concentrated primarily on potential competition for the Bakerloo and Piccadilly lines' resignalling contracts.

Initially, evidence suggested that Hitachi could be a competitive bidder against Thales and Siemens for these contracts.

However, new information gathered post-consultation indicated that Hitachi may not be a strong contender to supply CBTC systems to the London Underground in the foreseeable future.

Resignalling the London Underground is notably intricate, with TfL prioritising providers with a proven track record.

Many of Hitachi's pertinent CBTC initiatives were still underway, and not as intricate as the upcoming projects for the Bakerloo and Piccadilly lines.

As a result, within the expected tendering timeline, Hitachi may not meet TfL's standards for the projects.

With that updated evidence, the CMA said it had revised its preliminary conclusions, and now believed Hitachi would not pose a substantial challenge to Thales for future CBTC projects on the London Underground.

As a result, the merger was now not anticipated to diminish competition for CBTC signalling systems in the UK.

"Effective competition in the urban and digital mainline signalling markets is essential for ensuring the UK's rail transport systems are efficient and reliable for passengers who rely on these services," said Stuart McIntosh, chair of the independent inquiry group.

"Having reviewed the additional evidence, which indicates that Hitachi is unlikely to be a credible bidder for signalling projects on the London Underground in the foreseeable future, we have provisionally concluded that the merger would not harm competition in the supply of these systems in the UK.

"That said, our provisional view that this merger raises concerns in the supply of digital mainline signalling in Great Britain, is not affected by today's announcement."

The CMA said its investigation was continuing, and remained due to issue its final report by 6 October.

Reporting by Josh White for Sharecast.com.