ORR op­poses Siemens-Al­stom merger on com­pe­ti­tion grounds

Rail (UK) - - Network News - An­drew Ro­den Con­tribut­ing Writer rail@bauer­me­dia.co.uk @AndyRo­den1

THE Of­fice of Rail and Road (ORR) is ob­ject­ing to the pro­posed merger of Al­stom and Siemens on the grounds that the re­duc­tion in com­pe­ti­tion, par­tic­u­larly in sig­nalling, “will have a sig­nif­i­cant detri­men­tal ef­fect on com­pe­ti­tion in Great Bri­tain”.

The reg­u­la­tor also ex­presses con­cern about the im­pact on com­pe­ti­tion in the rolling stock mar­ket, for which Siemens and Al­stom are among the big­gest sup­pli­ers in the UK mar­ket.

In its sub­mis­sion to the Euro­pean Com­mis­sion’s in­ves­ti­ga­tion into the merger, the ORR says “sig­nif­i­cant struc­tural reme­dies are re­quired”, in­clud­ing the di­vesti­ture of in­tel­lec­tual prop­erty, sub­stan­tial as­sets and the “sig­nif­i­cant trans­fer of spe­cialised work­force”.

It ar­gues that the ac­qui­si­tion by Al­stom of Gen­eral Elec­tric Sig­nalling and Bal­four Beatty’s share of Sig­nalling So­lu­tions, and by Siemens of In­ven­sys Rail Sys­tems, would (if the merger is ap­proved) give a col­lec­tive mar­ket share of be­tween 55% and 80% of the sig­nalling mar­ket in the UK.

This fol­lows Bri­tish Rail’s his­toric agree­ment with pre­de­ces­sor com­pa­nies West­ing­house and Gen­eral Elec­tric Sig­nals to de­velop and de­ploy the Solid State In­ter­lock­ing (SSI) sys­tem, which forms the bedrock of much of the UK net­work’s sig­nalling. ORR points out that only mi­nor in­roads have been made by com­peti­tors, and that while in­tro­duc­tion of Euro­pean Train Con­trol Sys­tem sig­nalling will take place, ana­logue sig­nalling will re­main the most widely used sig­nalling tech­nol­ogy for the fore­see­able fu­ture.

ORR con­sid­ers that only Al­stom and Siemens have ac­cess to ac­cred­ited tech­nol­ogy ca­pa­ble of ef­fi­cient op­er­a­tion with UK in­fra­struc­ture, the scale of op­er­a­tions and ge­o­graph­i­cal pres­ence to un­der­take sig­nalling projects ef­fi­ciently, the ex­per­tise and ex­pe­ri­ence of work­ing on com­plex projects, and an es­tab­lished work­force ca­pa­ble of the re­quired sales, re­search and de­vel­op­ment plan­ning, de­sign, project man­age­ment and in­for­ma­tion tech­nol­ogy.

And, while Net­work Rail is a near monop­son­ist buyer of sig­nalling, Al­stom and Siemens ac­counted for 93% of its sig­nalling spend in 2016-17.

ORR be­lieves the merger of the sig­nalling busi­nesses “is ef­fec­tively a ‘2-to-1’ merger to mo­nop­oly for the pro­vi­sion of sig­nalling projects and prod­ucts in Great Bri­tain”.

A fur­ther con­cern is that a com­bined Al­stom-Siemens op­er­a­tion would re­tire cur­rently com­pet­ing tech­nolo­gies. In other Euro­pean mar­kets, there are usu­ally three or more sup­pli­ers. And where there are two, Al­stom and Siemens do not com­pete.

On rolling stock, ORR cal­cu­lates that Al­stom and Siemens com­bined hold a 35% share in post-pri­vati­sa­tion rolling stock or­ders. Although this is less than Bom­bardier, it points out that both com­pa­nies are key bid­ders (even if un­suc­cess­fully) on most UK rolling stock con­tracts.

Although in terms of the num­ber of sup­pli­ers, the merger would be ‘5 to 4’ or ‘4 to 3’, ORR says the deal “rep­re­sents a trans­ac­tion whereby two of the top three reg­u­lar com­peti­tors for ma­jor rolling stock con­tracts in Great Bri­tain are be­ing com­bined”.

ORR Chief Ex­ec­u­tive Joanna Whit­ting­ton said: “Com­pe­ti­tion in the sup­ply chains which sup­port Bri­tain’s rail­way is es­sen­tial if pas­sen­gers and tax­pay­ers are to re­ceive a high-qual­ity ser­vice at an ef­fi­cient cost.

“We are con­cerned that the pro­posed merger of Siemens and Al­stom will sig­nif­i­cantly re­duce com­pe­ti­tion, lead­ing to in­creased costs in Bri­tain’s rail­way sig­nalling and rolling stock mar­kets.

“That is why we are set­ting out strong ar­gu­ments to the Euro­pean Com­mis­sion, and press­ing for sig­nif­i­cant struc­tural reme­dies to en­sure com­pe­ti­tion in key rail­way sup­ply chains is pro­tected.”


Govia Thames­link Rail­way 700031 passes Sel­hurst on May 19. This train was built by Siemens, and the ORR is op­pos­ing a planned merger be­tween the Ger­man man­u­fac­turer and Al­stom.

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