Hitachi Rail’s offered to sell part of its mainline signalling business addresses the UK competition regulator's concerns regarding the merger between two signalling suppliers.
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The Competition and Markets Authority (CMA) has made its final decision in relation to Hitachi’s €1.7 billion proposed purchase of Thales Ground Transportation (GTS) business following an in depth investigation.
Signalling systems are a core part of railway infrastructure, helping to maintain passenger safety by controlling the movement of trains and maximising capacity on railway networks.
Hitachi Rail and Thales’s Ground Transportation business are both global suppliers of signalling systems for mainline and urban railway networks.
The CMA’s independent Inquiry Group concluded that the merger would give rise to competition concerns regarding the supply of digital mainline signalling systems which are being used increasingly on the country’s main railway networks.
The Group found that Thales and Hitachi are both well placed to supply these systems and that, should the merger go ahead, few credible competitors would remain.
In response to the CMA’s findings, Hitachi has offered to sell its existing mainline signalling business in the United Kingdom, France, and Germany.
The Group will need to approve the purchaser and Hitachi’s key customers in these countries will also need to agree to the transfer of the relevant signalling contracts.
The Group considers this to be an effective and proportionate remedy, which will preserve competition and ensure customers, such as Network Rail, will not be negatively affected by the merger.
Based on new evidence that came to light after its initial provisional findings, the Group no longer has competition concerns regarding the supply of Communications Based Train Control (CBTC) signalling systems which are used on urban rail networks, such as the London Underground.
The Group concluded that, while Thales is an important supplier to the London Underground - the only urban rail network in Great Britain with plans to carry out new CBTC projects in the foreseeable future - Hitachi would be unlikely to meet TfL’s requirements for these projects.
Renewing the signalling systems on the London Underground is particularly challenging compared to most other metro systems, given the size, complexity and age of the network. It requires suppliers with significant expertise in delivering CBTC projects on similar, very large, complex networks.
The Group concluded that Hitachi is unlikely to have attained the required level of experience by the time of the next major TfL signalling tenders. ■