Haines sets out objections to Alstom/Siemens merger
NETWORK Rail Chief Executive Andrew Haines has written to the European Commission objecting to the planned merger between Alstom and Siemens, saying that should the merger go unchecked, it could “do great harm to the railways in Great Britain”.
In a letter seen by RAIL, dated October 25, Haines wrote: “Since joining the organisation [NR], it has become apparent to me that the competition concerns raised by the above transaction are one of the most significant threats to our operations at present.”
He highlighted how the two companies, independently, are the only two material technology providers and manufacturers of signalling systems for major signalling projects for Control Period 5 (April 1 2014-March 31 2019), and that combined, they accounted for 93% of spend on Network Rail’s major signalling framework for the financial year 2016-17.
Haines wrote that through a string of acquisitions, the two companies had absorbed Westinghouse and GEC - two companies used by British Rail to jointly develop the country’s SSI signalling technology in the 1980s. He said the aim then was to guarantee healthy competition, and warned that if cleared unconditionally, the merger could wipe out that competition entirely.
He explained that the companies consistently rank as numbers 1 and 2 when bidding for projects, and that third parties are often some way off. He said that should a non-Alstom or non-Siemens bidder win a deal, then they rely on access to those company’s products and professional services.
He also warned of potential harm from competition to third parties that require access to the merging company’s installed equipment.
The letter offered solutions, stating that in the absence of a prohibition decision, the only possible remedy that could restore competition to pre-merger levels is an appropriate structural divestment.
Haines added: “To work in practice, as the Commission sets out in its guidance, any such remedy must: eliminate the competition concerns (i.e. address all four harms identified including the significant loss of direct competition between the two closest competitors in GB and the need for continued third party access to the required technology and installed base); be comprehensive and effective; and be capable of being implemented effectively, within a short space of time.”
Haines wrote that divesting the former Invensys business, bought by Siemens in 2013, was the only way to satisfy these requirements.
This currently trades as Siemens Mobility, and would need to include Westinghouse Rail Systems and Invensys Rail Dimetronic in Spain. Siemens’ signalling operations in Chippenham and its Dimetronic operations in Madrid would also need to be included.
Haines added in his letter that the divestment would need to be comprised of a viable business, sold as a going concern to a suitable purchaser, enabling it to compete effectively with the newly merged entity on a lasting basis.
As this issue of RAIL went to press, Alstom and Siemens had yet to respond.