Stagecoach argued that passengers would enjoy better connections, higher frequencies and whole network ticketing upon the purchase of Eastbourne Buses and Cavendish Motor Services. Stagecoach also offered guarantees that fares in Eastbourne would not rise beyond those in East Sussex. It further waived the anti-competition clause Cavendish’s former parent Renown signed when Stagecoach bought Cavendish.
In spite of this, it’s still not surprising that the OFT has taken the view that the merger should be referred to the Competition Commission, given the history of the OFT versus Stagecoach.
At the back of the OFT’s mind is its March 2009 decision to examine the bus industry in some detail. This is in the light of the take-over frenzy over the last couple of years that leaves considerable chunks of the industry in the hands of the Big Five. And a paucity of competition (on commercial services or for tenders). There are very sound reasons for these take-overs and in the vast majority of cases, no one is forcing an operator to sell.
On a more local basis, the OFT may be unimpressed by some of Stagecoach’s claims. A better and more coherent network from March 2009, certainly, but frequency enhancements? About half of the routes see no improvement in terms of frequency but that was because they couldn’t stand the uplift. Nevertheless, Stagecoach has introduced regular, clockface departures where once two competing companies ran around & on top of each other. Perhaps the OFT can’t recognise a good thing when they see it.
And Stagecoach in Eastbourne has invested in its fleet, with the timely introduction of a dozen ADL Enviro 300s. Given the parlous position in which Eastbourne and Cavendish found themselves, such investment was otherwise unlikely.
Eastbourne is a classic case. Here was an ailing, lower cost operator with equally lower cost competition that was hæmorrhaging the network. Both were making losses. If Stagecoach is unable to argue that the benefits of consolidation and financial sustainability outweigh the loss of competition, what chance has the wider industry got in persuading the OFT to leave it be?
Friday, 12 June 2009
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11 comments:
The OFT do seem to have it in for Stagecoach. Earlier on there was Scottish Citilink, then Huntingdon & District, then Preston and now Eastbourne. Yes, there have been times when the behavior of Stagecoach has left something to be desired, but the OFT's blindness to the strength and public benefits of a network does seem very frustrating.
With the natural progression in a free market to 'survival of the fittest' it does not take very long before there are relatively few players. Would Cavendish have lasted long if one of the three other big fish had swallowed up Eastbourne? Were any of them actually interested in doing so? It would only have fitted one company from along the coast and I suspect that they did not consider it worthwhile. Cavendish seem only to have been successful on the back of Eastbourne's weakness.
Certainly as far as towns are concerned, where there is a limit to the need of provision of routes, there seems far more benefit in providing a service to as many as possible rather than having buses chasing each other in some parts leaving other parts unserved.
Of course you could argue that such were the underhanded tactics of Stagecoach back in the 90s that the company needs to undergo scrutiny on every occasion it purchases a bus company - leopard not changing its spots and all that.
The antics in Preston last year made me feel uneasy. It wasn't quite 1994 in Darlington, but brought back memories of that dire situation - now of course, Stagecoach has flogged its operation therein to Arriva.
Not many transport companies have been the subject of an entire World in Action programme.
Stagecoach argues that the industry has matured and so too has its negotiation techniques. While this is true, when someone has such a poor reputation in a certain area (for Stagecoach this is dubious take-overs), I am personally glad that the OFT has chosen to keep a watchful eye on its acquisitions.
The implication some transport watchers have made that, had Stagecoach not stepped in when it did, Eastbourne would not have had a bus company is rubbish. Go-Ahead were willing to purchase the ailing municipal and is the local council felt their offer was not enough. Stagecoach came in with a higher bid. A considerably higher bid.
I wonder if they now think it was worth it?!
The OFT are doing their usual thing of making the facts suit their objectives - they link the 19000 population of Hailsham to Eastbourne's own population and then say that the combined figure makes it the size of Slough, which has featured in a previous (non-bus) OFT investigation. So ???
They further mention that Stagecoach are also the major operator in Hastings, forgetting that Bexhill in between is Renown's homeland, and that Eastbourne folk rely far more on (non Stagecoach) Lewes and Brighton than on Hastings for out of area trips.
Sorry, but I consider the referral to be a total waste of taxpayers money which will not benefit the bus users of eastbourne in any way at all.
I'm in Hailsham, and the bus service between here and Eastbourne has far improved.
Previously I've tried to use Eastbourne Buses three times. First time it wasn't clear what side of the road I had to wait for the bus; the timetables were illegible, and there was no information on the signs. I chose the side with the bus shelter thinking the more 'luxurious' bus stop would be the one in use, I got it wrong and missed the bus as I couldn't cross the road in time.
Other times it just hasn't turned up (emailed them to complain, apparently the driver was ill) or broken down half way there on some ancient heap of a bus.
Went to Eastbourne again the other night. Brand new 58 reg bus with CCTV, decent lighting and very quiet.
New flags on the bus stops with clear information on, new timetables that you can actually read, website with all the information you need on it... just much much better in general.
I would have preferred Go-Ahead to take over, they seem to run services more in tune with the community, plus Brighton & Hove Buses offer a simply spectacular service, but Stagecoach is miles ahead of Eastbourne Buses.
Wind your necks in OFT.
There was plenty of behind the scenes politics and personlity issues between EB and RC. Also councils rarely make good bus operators, as they are not commercially-minded concerns.
Notice how Stagecoach often only take on relative minnows,and not any of the other big five.They are content to share places like Oxford,which would be very lucrative for just one operator,in the way that Brighton has become. Will this policy change as the remaining UK purchase options dry up ?
The OFT and Competition Commission are a bumch of political muppets who neither know nor care what might be the real position vis a vis the ordinary member of the public...their reports reflect the desires of their political masters and nothing more. To add insult to injury they are generally put together with an incredible lack of care...
I still recall the opening line of the Competition Commissions report on Stagecoach activities in Bognor..."Pagham is a village to the East of Bognor Regis...."
It was only 180 degrees out and went downhill from there...
As just one example the table showing the all-critical comparison of costs between Stagecoach and its competitor was out by a factor of ten...no not ten percent...TEN
It doesn't really matter whether you feel any particular operator is in the right or wrong...Fixing the evidence with this degree of ineptitude is unforgivable...even by the standards of a totally discredited parliamentary system....
And the cost to the taxpayer?
Go Ahead were clearly not interested in Eastbourne-their bid to purchase EB failed to reflect the pension liability. EBC could of course have done a Chester and sold the operation to them for a loss. Chester's sale left the Council owing a lot of money as there were virtually no proceeds.
Stagecoach of course doesn't pay over the odds for any companies it purchases - so Go Ahead's bid can clearly be seen as reflecting their lack of interest.
The OFT won't be convinced any argument of rational common sense...so you might argue what the point is in trying to convince people who are pre-disposed not to listen to your arguments. It's very much 'talk to the hand, the face ain't listening'....
That probably coloured Stagecoach's approach to acquisitions in the mid 1990s - Lancaster and Darlington being the two most high profile, with Lancaster being the case where they didn't bother to bid.
Perhaps Stagecoach should return to that policy of not bidding for run down assets, and just waiting for the company to fail, then registering the networks, rather than having to deal with a system that is one sided. Stagecoach's approach is different now, as it will buy assets it once considered not worth it - look at Preston Bus it was competing with.
First West Yorkshire was allowed to buy a direct competitor in Leeds in 2005 because the competitor was defined as a failing firm.
Its demise wouldn't have impacted upon the travelling public, as there were plenty of First/Arriva buses around- yet Eastbourne Buses was weeks away from administration, meaning the possibility of a seriously reduced service in the area as R/C's operations were daytime only.
I hail from an area where Firstgroup is the main provider - and there is a common strand to their operations where you can clearly see they are disinterested in running those services. Services constantly reduce, or are withdrawn with the council replacing them.
Fares constantly increase more than once a year, with that increase attributed to increased costs - no issue there but there seems to be little incentive or willingness to upgrade what they offer to the customers - meaning that the network will continue to contract rather than grow because they do nothing.
Look at what Stagecoach does with the small town networks it has, and look at First's approach to them.
I'm quite sure First will be allowed to buy the Plymouth Citybus operation with no opposition from the OFT and the CC, despite being the predominant provider of services in the Plymouth area (with more than the 25% of services provided), and running most of Cornwall, Devon, Somerset, the old county of Avon's bus networks in addition to its rail franchise which at times has been dreadful.
Have a look at the third party evidence submitted on the CC website-Arriva mention they'd not have been interested in EB unless they could also have CMS (as in Preston where they wanted Stagecoach's depot in addition to PB), Go-Ahead decided to offer less money for it and the likes of Countryliner say the takeover hasn't affected their ability to win contracts and even CMS themselves say their operation couldn't survive long term and its in better hands of a single network provider.
Preston Bus is slightly different - in 2006 (12 months prior to Stagecoach's network) the business recorded an operating loss and was being kept afloat by a six figure sum loaned from the Employee Benefit Trust. Stagecoach offered to buy at that time, and had PB accepted the bid, Preston Bus's shareholders would have done a lot better from the deal.
Preston Bus provided an awful service for a small local company - I'd expect that service to be one I'd have wanted to use, but exact fares are a massive disincentive, combined with the oldest buses on my former local route. So when someone offers new low floor buses, drivers who don't grunt at you as you board and behave in the rudest manner you've ever encountered and give change on their services oddly enough people will go for that option.
Wonder if OFT still remember Darlington.
I think the OFT does remember Darlington, and this is why Stagecoach is probably having more attention than others. But before Darlington, they'd had more attention...
I think Darlington was a wake up for the group - they've not gone into an area in that way since then-although if you've read Christian Wolmar's 90s book on Stagecoach you get an insight into their intentions - and there was a chapter on Darlington.
Where I hail from, Stagecoach didn't operate services in my area, and having seen what they were doing with bus networks would have wished they'd have took over my old NBC company.
If Stagecoach provided a poor service, didn't invest and didn't grow its networks I'd understand the OFTs interest - look at what they have managed to do with their operations and look at others.
Esatbourne's local MP is getting involved again. As usual he seems to be scare mongering (like higher fares will only happen with Stagecoach - no other operator ever raises fares) and mentioning the Cavendish redundancies again (which I believe eventually totalled 2). This one looks likely to run and run.
From the paper: MP NIGEL Waterson has thrown his weight behind the Competition Commission's investigation into the sale of Eastbourne Buses and Cavendish to Stagecoach.
The commission is looking into the sale of the two companies to the national bus operator due to concerns that the deal had created a monopoly in local bus services.
Eastbourne Borough Council sold Eastbourne Buses to Stagecoach late last year and w
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ithin days Cavendish had also sold to the company.
Eastbourne and Willingdon MP Mr Waterson has now submitted his evidence to the Competition Commission.
He said he was not surprised there was a probe into the takeovers.
He added, " I said all along that the deal was botched and had the effect of handing a monopoly to Stagecoach.
"Those responsible at the borough council have some serious questions to answer. Were they advised that such an investigation might arise? If not, why not? If they were, why did they ignore the advice."
In his evidence submitted to the investigators, Mr Waterson said, "My constituency contains a significant proportion of elderly and vulnerable people who depend heavily on local bus services.
"Eastbourne Buses had been in business for more than 100 years but in recent years I do not believe it had been well managed, and some months before the sale to Stagecoach the Conservative councillors who were members of the board resigned in protest at the poor management and lack of direction from the borough council, which was the major shareholder.
"In my view, the borough council was in too much of a hurry to sell its majority share and as a result, the price obtained from Stagecoach did not fully reflect the value of the business as a going concern.
"This was exacerbated by the council shouldering the outstanding pension fund liability estimated at £4.4 million.
"In retrospect, it is now clear that in parallel with the negotiations to buy Eastbourne Buses, Stagecoach were also negotiating to buy Cavendish – the only significant local competitor.
"Once it had bought both companies, Stagecoach announced to the staff of Cavendish, some of whom contacted me, that it was closing the company and selling the depot in Polegate.
"This left Stagecoach as effectively the monopoly operator in my constituency.
"I believe the effect on many of my constituents will inevitably be higher fares and reduced services so I welcome the Competition Commission investigation."
If Mr Waterson wants to start kicking highly-generalised muck around, he'd do well to remember that there's plenty currently available in Westminster....
Frankly his views would carry more weight if they didn't come from a member of what appears to be a highly corrupt ruling elite...
tosser...
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