Stagecoach move for Mana challenged

Infratil's move to extend its dominance of Wellington's bus services by buying Mana Coach Services has pulled up at a red light.

The Commerce Commission has challenged the deal, arguing it will shut the door on smaller competitors and new entrants.

In a brief High Court fixture yesterday, Infratil subsidiary New Zealand Bus Lines, which owns Stagecoach, agreed to defer its purchase of the 74 per cent of Mana Coach Services it does not already own pending the outcome of a two-week High Court hearing beginning on May 22.

The hearing will consider the commission's view that the deal would substantially reduce competition in the relevant market.

Infratil executive Paul Ridley-Smith said NZ Bus Lines withdrew an application for commission clearance for the deal on March 15.

In the meantime, the purchase, which was to have been settled yesterday, would be deferred until the outcome of the May hearing and it would be "business as usual for Mana and Stagecoach" until then.

The commission said the relevant market for consideration was that for "the acquisition of rights to operate subsidised regular and/or school bus passenger services in the Greater Wellington Region, excluding the Wairarapa".

Commission staff said the deal would result in a market consisting on one large incumbent - the combined entity and six small operators who were regular bidders for Greater Wellington Region Council and Ministry of Education contracts.

That, combined with the likelihood that new entrants would face significant barriers, meant "there would be no significant constraint on the combined firm".

Last year, Infratil paid $252 million for UK-based Stagecoach's Auckland and Wellington bus operations, Fullers Ferries and Stagecoach's downpayment on Mana Services.

At the time, Stagecoach had 658 buses in Auckland and 365 in Wellington. Mana Coach Services, which, apart from Stagecoach's 26 per cent holding is largely owned by the Waddell family, has about 100 coaches.

In its "Public Transport Update", Infratil outlined the reasoning behind its public transport investment.

"Public transport is a growth sector with Government and local government in Auckland and Wellington committed to increasing patronage. For Government, it is cheaper and much more quicker to encourage commuters to use public transport than to build roads."

Infratil estimated the total spend on public transport this year was likely to be about $500 million. While much of that will go on capital expenditure, regional councils will allocate a lot to acquire public transport services from the private sector.

Infratil had invested in Stagecoach "to grow the business by ensuring it is New Zealand's preferred public transport operator".

On the buses

* Infratil subsidiary Stagecoach's purchase of Mana Coach Services faces a Commerce Commission challenge.

* The commission believes the purchase would make Stagecoach the dominant player in the market for supplying subsidised public transport services.

* The purchase is part of Infratil's strategy to make Stagecoach New Zealand's "preferred public transport operator".

* Infratil believes government spending on public transport will increase because it is cheaper than building new roads.