* CC says bus operators face little or no competition
* Rules out price controls and divestments for now
* To publish final report in November
* Move likely to cap industry profits
* National Express shares down 1.4 pct
(Adds comments from analyst, Stagecoach, trade body; shares)
By Adveith Nair
LONDON, May 6 Britain's competition regulator is
looking at ways to open up the bus transport market after
finding operators face little or no competition in a move likely
to cap profits in the industry.
The Office of Fair Trading referred the local bus market to
the Competition Commission in January last year, following its
study on the sector and public consultation.
A provisional investigation by the commission showed the
five largest operators -- Deutsche Bahn's Arriva, FirstGroup
(FGP.L), Go-Ahead (GOG.L), National Express (NEX.L) and
Stagecoach (SGC.L) -- tended to make profits above the cost of
capital over the last five years.
"There are a large number of towns and cities where bus
operators face limited competition and little prospect of
significant change," Jeremy Peat, Chairman of the commission's
Local Buses Inquiry Group, said on Friday.
These companies provided over two-thirds of local bus
services in the areas it looked at, the commission said in a
statement on Friday. Privatisation of the UK bus industry began
decades ago and deregulation dates back to 1986.
"In a market that was deregulated in anticipation of
widespread competition that is clearly a problem and there are
evident risks of disadvantages for passengers."
The regulator is investigating moves such as restrictions on
obstructive practices such as ensuring access to bus stations
for all operators, and new recommendations for local transport
authorities on how they can promote competition.
However, it ruled out stronger measures such as price
controls and forced divestments, a move the Confederation of
Public Transport welcomed.
Simon Posner, Chief Executive of the trade body, added that
Friday's report "does nothing to address the primary concern of
bus passengers -- punctuality of services and the improvement of
Arbuthnot analyst Gerald Khoo warned the report could
restrain investor enthusiasm for the sector. "Our initial
reading of the CC's findings is that they are towards the
negative end of the potential range of outcomes," he added.
Shares reaction was muted, with shares in National Express
down 1.6 percent at 258 pence, compared to a FTSE 250 mid-cap
index down 0.7 percent. Stagecoach was up 0.5 percent and
Go-Ahead was down 0.5 percent.
The full report will be published next week and the
regulator will consider responses and hold further hearings
before publishing its final report in November.
Stagecoach noted that the commission was not proposing any
fundamental change to the industry's regulatory structure and
that it would work with the commission on measures to improve
(Reporting by Adveith Nair; Editing by Rhys Jones and Rosalba