© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 25, 2011 12:07 am
Arriva, a subsidiary of Deutsche Bahn, has won a 12-year contract to become Stockholm’s biggest public transport operator, a key step in its European expansion strategy.
The deal, which should earn the group about £1.5bn ($2.3bn) in revenues over the course of the contract, doubles Arriva’s exposure to Sweden, which has been a leader in privatisation of public transport.
The entrepreneurial, foreign-focused arm of Deutsche Bahn, Arriva operates in 12 countries, including the UK, where it was listed before being bought by the German company last year.
The deal is the group’s biggest contract win under its new parent, and the first that was not a renewal. “It’s part of what Arriva’s there to do, but it follows on from the strategy we had in place [before the Deutsche Bahn deal],” the company said.
While the company is not adverse to targeted acquisitions, it bases much of its growth strategy on liberalisation of transport markets across Europe, as cash-strapped governments seek to reduce their spending.
Sweden deregulated buses in the 1980s, but followed the UK in privatisation of the train network. Deutsche Bank calls it one of five mature markets for bus travel in Europe, and among just three for rail.
The services in the Stockholm contract were previously operated by a local transport authority. Arriva will take over in two phases, assuming the deal makes it through a one-week appeal process, starting in August next year and in January 2013.
Arriva expects to carry 65m passengers a year, on nearly 40 trams, more than 500 buses and 45 commuter trains. This contract is longer than the average eight-year agreements in the country.
David Evans, managing director of Arriva’s mainland Europe division, said integration of the network was “a key component of the contract”.
The company operates a regional train service in the south of the country and about 5 per cent of buses in Sweden, again in the south. It runs half of the bus services in Malmo, Sweden’s third biggest city and 164 buses in Stockholm.
Arriva reported €3bn in revenues last year, contributing to Deutsche Bahn’s approximately €30bn. In the UK its operations include the CrossCountry franchise, most of the Welsh network, and London and regional buses.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in