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 Ltd (Hitachi) and Thales SA’s Ground Transportation business
(Thales GTS) 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.
Stuart McIntosh, chair of the independent Inquiry Group, said:
Effective signalling is vital for safe and reliable rail travel,
which is why it has been important for us to review this merger
thoroughly before reaching a final decision.
We have concluded that the merger will not reduce competition to
provide CBTC signalling systems, and in particular those required
on the underground network in London.
The picture is not the same for digital mainline signalling. To
address our concerns here, Hitachi is selling part of its
existing mainline signalling business to an independent
purchaser. This will protect competition, which is key to keeping
costs down, maintaining high quality of service and promoting
innovation.
All information relating to this merger investigation can be
found on the Hitachi / Thales case
page.
Note to editors:
- Digital mainline signalling is an in-cab signalling system
that allows trains to run closer together safely and to travel at
their optimal speeds; conventional mainline signalling provides
information to train drivers via colour light signals alongside
the tracks. Digital Communications Based Train Control (CBTC)
signalling is the most common signalling technology used for
urban metros such as the London Underground.
- The supply of mainline signalling in GB is currently
undergoing significant change. A Signalling market study
carried out by the British rail regulator – the Office of Rail
and Road (ORR) - found that there were two main players in the
GB market for major signalling projects, namely Siemens and
Alstom, and that other firms were not able to compete on equal
terms. It also found that there has been a significant increase
in the cost of signalling. ORR made a number of recommendations
intended to increase competition from alternative suppliers,
such as Hitachi and Thales.
- The principal GB customer for mainline signalling, Network
Rail, is taking steps to introduce a broader range of suppliers
into the GB market leading to greater competition and increased
capacity to deliver projects. It has put in place a new tendering
process for its current major signalling procurement, Train
Control Systems Framework (TCSF), to implement the ORR’s
recommendations. In parallel, the introduction of digital
technology will drive one of the most significant modernisation
programmes in the nearly 200-year history of Britain’s railway
infrastructure.
- Hitachi’s €1.7 billion proposed acquisition of Thales GTS is
also being investigated by the European Commission.
