Rivalry 'won't work for MRT'
By Christopher Tan
THE chairman of ComfortDelGro, Mr Lim Jit Poh, wants one operator for trains and another for buses because 'it's plain to see that competition for certain industries doesn't work in a small economy such as ours'.
He expressed his reservations on competition when asked to comment on the possibility of SMRT Corp taking over the money-losing North-East MRT Line (NEL) now run by ComfortDelGro's subsidiary, SBS Transit.
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It is a view that mirrors events in the media industry last week when rivals Singapore Press Holdings and MediaCorp consolidated their positions by merging their mass-market television and free-newspaper operations.
Mr Lim told The Straits Times: 'It is in my opinion better to centralise the rail and bus operations; that is, have one operator for each.'
While insisting that such a plan was not under way, he indicated that one possibility would be for SBS to sell the NEL to SMRT and buy its bus business, which SMRT acquired for $194 million in 2001.
'Let the different modes compete with each other and let commuters decide which to choose from,' Mr Lim said, noting that taxis, the third mode, 'are already deregulated, with three more new players on the scene'.
'At the end of the day, this will be best for all,' he said.
The potential of a deal between the transport operators was first floated by Transport Minister Yeo Cheow Tong last year, when he said the Government would not object to a merger of rail operations.
He reiterated it soon after, saying SMRT will automatically operate all future lines if it took over the NEL.
With the media merger, talk of a rail deal resurfaced. Yesterday, the speculation drove ComfortDelGro's share price five cents higher to a record $1.36.
It surpassed most analysts' price targets for the year as a hefty 15.34 million shares changed hands, putting it fifth on the list of most active stocks.
SMRT's shares moved half a cent higher to 70 cents on a trading volume of 2.64 million shares.
Said one analyst: 'The benefit of a deal is seen to be more immediate for ComfortDelGro. It will stem its losses on the North-East Line, which is about $20 million a year. The benefit for SMRT, however, is a bit more longer term in nature.'
Observers see the two transport operators facing similar challenges as the media companies.
One has a money-losing rail business, while the other has a small and not-so-profitable bus operation.
But unlike SPH and MediaCorp, which had been talking for about two years, the transport companies, sources said, had met only once on the issue.
'So far, there is nothing,' said SMRT chief executive Saw Phaik Hwa yesterday, maintaining that it did not make sense to pay for a money-losing company.
But she is not saying never, adding that 'it all depends on the deal'.
However, Ms Adele Yeo, an analyst at investment bank JP Morgan, said investors should not hold their breath for a deal.
'We do not see such plans in the near term,' she said.
A ComfortDelGro insider said yesterday: 'If we have to pay SMRT to take over the line, we might as well run it ourselves.'
The Straits Times understands that consultants engaged to assess the NEL had concluded that it would be profitable in the long run.
Analysts concur.
Kim Eng Securities transport analyst Lisa Lee said the 20km line would lose about $18 million this year and will 'break even in 2007 or 2008'.
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