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KCR - MTR Merger

8339 Views 12 Replies 9 Participants Last post by  hkskyline
Government approves merger plan for Hong Kong railways

HONG KONG, April 11, 2006 (AFP) - Hong Kong has approved a plan for the city's two railways to merge in a multi-billion dollar deal hoped to see the tiny territory become a key Asian rail hub, officials said Tuesday.

Political leader Donald Tsang said his Executive Council (Exco) cabinet had given the green light for the Mass Transit Railway Corporation (MTRC), which runs the city's hi-tech subway, to join forces with the Kowloon-Canton Railway Corporation (KCRC), which runs cross-border rail services into China.

"The proposed rail merger will bring tremendous benefits to the community," Tsang told reporters, ending two years of speculation on the future of the two networks.

"The travelling public will get immediate benefit from fare reduction on day one of the rail merger," he added. "The integration of the two rail systems will also bring more convenience to passengers through better interchange arrangements."

Transport secretary Sarah Liao said the deal would achieve huge synergies and see local rail fares cut by between five percent and 10 percent as soon as it was signed into law by legislators.

While the high-speed Airport Express service and the cross-border routes will be included in the merger, the new pricing structures will not apply to them, Liao said.

"It is a fair and balanced deal," Liao said. "It will bring us a stronger rail operator that is much more competitive in the China and international arena."

Operations will be merged by allowing the MTRC, a listed company 76 percent owned by the government, to lease the assets of the KCRC over a 50 year period.

The government, which owns the mainline network, will be paid a one-off payment of 4.45 billion Hong Kong dollars (544 million US dollars) by the subway operator and 7.79 billion dollars for a property package.

There will be an additional 750 million annual payment into public coffers and a further annual payment of between 10-35 percent of revenue.

If after 50 years the MTRC has not bought the KCRC outright, it will be able to extend the lease or hand back the railway's assets to the government.

The deal, which is subject to approval by the MTRC's 400,000 minority shareholders and by the city's legislators, will see the yet-to-be-named merged company rationalise equipment and staff, shedding some 600-700 manager-level employees.

"Frontline staff on both railways will not be affected at all," said Raymond Chi'en, MTRC chairman. "And within two to three years we anticipate that synergies will create 1,300 new vacancies."

The railways' merger has been mooted since February 2004 when the government of then chief executive Tung Chee-hwa invited the two corporations to discuss details of a possible merger.

KCRC chairman Michael Tien said the interim period had seen a lot of hard negotiating.

"I'm glad that we've come to a conclusion," Tien said. "We have something that is feasible."

While both corporations are profitable, their railway operations are usually loss-making ventures that are buoyed by lucrative real estate built over the networks' scores of stations.

Tsang said Exco had approved the companies' proposed merger structure and terms and said the resultant organisation would boost Hong Kong as regional rail hub.

"With the fast expanding railway network on the Mainland, the rail merger is a timely move for Hong Kong, which will enhance our ability and potential in connecting with a railway route (in China)," Tsang said.

"This in turn will generate economic benefits and opportunities for Hong Kong."

Liao hopes the merger will take at least a year to be signed into law. However, the proposal must first go to public consultation and will have to be approved by legislators, who are reportedly sceptical of the merger's merits.

Critics are uneasy over a recent management revolt at the KCRC, which saw one senior board member resign and others reprimanded for criticising Michael Tien, the corporation's chairman.

Neither Tien nor Liao would be drawn on the matter and both refused to answer questions on who was likely to head the newly merged company.

"As to the role I play in the railway I cannot answer," said Tien, who's term as KCRC chief expires next year.
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地鐵吞九鐵 長途減價逾一成
4月 12日 星期三 03:30 更新

(星島日報報道 )行政會議昨天通過兩鐵合併方案,地鐵將以一筆過四十二億五千萬及以後每年最少七億五千萬,租賃營運九鐵鐵路服務,營運期高達五十年。合併預計最快在一年後進行,兩鐵票價獲即時下調,十二元以上長途減一成以上,短途亦有百分之五的優惠。特首曾蔭權形容方案對整個社會帶來莫大的益處。









they said there'll be a new chinese name for the company... mmm... what do you guys reckon?

the english name 'MTR' though will be kept. :)
I think it's called Hong Kong Railways in Chinese
Heung Gong Tik Lo Gun Ci
TAC briefed on way forward for merger of MTR & KCR systems
Thursday, April 13, 2006
Government Press Release

The Transport Advisory Committee (TAC) was briefed by the Administration at its special meeting today (April 13) on the proposed way forward for the merger of MTR and KCR systems.

“The TAC has discussed and offered its views on the Administration’s proposed way forward for the merger of MTR and KCR systems. Members noted that the proposed merger package has met the five parameters set by the Government for the rail merger”, TAC Chairman Ms Cheng Yeuk-wah said.

“The TAC supports the proposal for a rail merger as it will enhance the efficiency of the rail network and bring immediate benefits to the travelling public.”

The TAC has discussed the proposed Fare Adjustment Mechanism (FAM) and the fare reduction package.

“We welcome the proposed introduction of a FAM which will allow fares to go up or down in future according to a formula that is linked to the consumer price index, a wage index and, a productivity factor. Railway fares will be reduced on Day One of the rail merger and the FAM will apply on the basis of the reduced fares. The future fare adjustment process will be more objective, transparent and the adjustment more predictable. This is a major improvement to the existing arrangement whereby the railway corporations have fare autonomy.”

“Members welcome the proposal to reduce fares that will benefit 2.8 million daily passenger trips. Since transport expenditure for long-distance travellers are generally higher, members supported the proposal to provide far greater reduction to this categories of passengers to relieve their financial burden.”

“Members believe this reflects the public aspiration that more assistance should be offered to long distance travellers to encourage cross-district travelling to work”, Ms Cheng added.

“We are pleased to note that passengers on journeys with fares at $12 or above will get at least 10% reduction in their fares. Naturally, the more fare reduction, the more receptive the public would be to the merger package. We have suggested the Administration to continue to listen carefully to and take into account public views in moving forward.”

The TAC noted that the job security for all frontline staff of the two corporations would not be affected as it related to the merger. This would help ensuring the stability and safe operation of the railway systems.

“The TAC noted that the two railway corporations would conduct further studies on the human resource integration and would consult their staff on matters affecting the staff. Members suggested that staff matters should be handled carefully to ensure the safe and efficient operation of the railway service at all times.”

The TAC noted that the post-merger corporation would continue to be subject to the existing regulatory regime and would be required to maintain performance standards not lower than to-day.

“After the rail merger, the Hong Kong Railway Inspectorate will retain the statutory powers to inspect the railway and investigate into railway incidents and accidents. The service and safety of railways and railway operation will be ensured,” Ms Cheng said.

The TAC was also briefed on the structure and financial terms for the proposed rail merger.

“We hope the merger package will be a fair and reasonable deal that could balance the interests of all stakeholders. If implemented, the rail merger will create a very strong Hong Kong-made railway operator who will be more competitive and in a better position than before to expand into the Mainland and overseas markets,” Ms Cheng added.
spicytimothy said:
I think it's called Hong Kong Railways in Chinese
Heung Gong Tik Lo Gun Ci

wud wud english name
they should change it as well
What will happend with the logos?
Anekdote said:
What will happend with the logos?
i don't think they'll change the logo... :) so very likely MTR's logo will be used across all networks.
Changing power supply companies after the railway merger?!

There are reports from today's Singtao Daily and its sister English newspaper The Standard for the merged railway company would use the power supply in China to force the two HK power suppliers to lower the price. Here’re the reports from the two newspapers. :|

Singtao Daily:

兩 鐵 合 併 謀 逼 減 電 費

市 民 盼 兩 鐵 車 資 下 調 , 減 輕 日 常 交 通 費 負 擔 。

  (星島日報報道 )兩鐵合併成為爭取減電費的有利契機。消息人士表示,政府研究現時每年繳交近十億元電費,用電量達中電售電量百分之四的兩家鐵路公司,透過九鐵羅湖站的電網,與內地深圳的供電網接通,從而為整個鐵路網絡供電,打開兩電壟斷的缺口。有立法會議員相信,如果兩鐵獲減電費,料車費有進一步削減空間。








The Standard:

Power pair face blow with railway merger

The Hong Kong government is likely to urge the merged MTR Corp and Kowloon-Canton Railway Corp to buy electricity from a supplier other than CLP Power and Hongkong Electric.

Staff reporter

Monday, April 17, 2006

The Hong Kong government is likely to urge the merged MTR Corp and Kowloon-Canton Railway Corp to buy electricity from a supplier other than CLP Power and Hongkong Electric.

The introduction of a new supplier will help the government break the long-time duopoly in the territory, pressuring the two companies to cut prices, according to a source close to the government.

It will also help open up Hong Kong's electricity market and thereby allow the territory's residents and corporations to reduce their power bills, analysts said.

"We would like to bring more pressure on [them] to cut prices before the introduction of a newcomer," the source told Sing Tao Daily, sister paper of The Standard.

"The proposed third party probably will be China Southern Power Grid, as its network is located near KCRC's Lo Wu station."

At present, Hongkong Electric supplies power to Hong Kong Island while CLP focuses on Kowloon and the New Territories.

"It would be feasible for China Southern Power Grid to extend its network to connect its electricity access with the Lo Wu station, allowing it to save time on building a new electricity grid," the source said.

He added the merged railway entity is likely to incur lower power bills if it sources its electricity from a third supplier.

Last year, the two railway operators spent a combined HK$1 billion to buy electricity from both CLP Power and Hongkong Electric.

Under the merger proposal unveiled by the government last week, MTRC will lease KCRC's rail network for 50 years in return for an upfront payment of HK$4.25 billion and an annual payment of HK$750 million.

When merged, the two railway operators are expected to use a single source of electricity.

China Power International Holdings became the first challenger to Hong Kong's power duopoly earlier this year.

At that time, the company, which is one of the mainland's five largest power providers, said it would partner with China Southern Power Grid to break into the Hong Kong electricity market within the first half of this year by supplying power to a small group of industrial and commercial users.

Last year, the government released its Stage II consultation paper for the development of Hong Kong's electricity market beyond 2008.

The government proposed a new scheme of control, to come into effect in 2008, defining its relationship with the two existing electricity suppliers. Under the new regime, the permitted rate of return for the duopoly will fall from the current 13.5 percent to as low as 7 percent while new licenses for operation will be valid for 10 years as opposed to 15 years.

The proposals will imply tariff cuts of 15 percent to 21 percent for CLP and 22 percent to 30 percent for Hongkong Electric in 2009, analysts said.

The proposal is strongly opposed by the two power firms, with CLP saying its relationship with the government is in danger of breaking down.

You may also read the thread of Third Electric Power Supply Company in HK? [Disscus!] :|
Rail users set for easier journey after merger
Hong Kong Standard
Tuesday, August 28, 2007

Commuters will enjoy a fare cut and hassle-free interchanges when the Mass Transit Railway and Kowloon-Canton Railway finally merge.

However, the actual date when the two railways will come together will only be set after a shareholder meeting in October.

MTR Corp merger integration general manager Adi Lau Tin-shing told a press conference that 110 ticket gates will be removed from the interchange stations at Kowloon Tong, Mei Foo and Nam Cheong.

"It will save our passengers the trouble of queuing up for entry or exit. We estimate about half or one minute can be saved," Lau said.

Lau also stressed that on the day of the official merger passengers will enjoy an immediate fare concession.

However, the interchange discount is restricted to Octopus card holders.

Those using single journey tickets will still need to buy a second ticket when changing systems. "We can expect a better arrangement within a year of the merger," Lau said.

He said construction work on removing unnecessary ticket gates and other amenities for the merged railway will begin once shareholders reach a consensus on the exact day.

With the removal of the ticket gates, Lau said the passenger walkway to the northern concourse of Kowloon Tong KCR station will be widened from 9.3 meters to 12.5m, meaning peak hour capacity of 10,000 passengers can be increased to about 30,000.

In mid May, tests were done to determine the construction plan and to minimize passenger inconvenience. Construction cost is about HK$40 million.
Hopefully the merge will improve the system to make it smoother :)
MTR ready for fares chaos as systems merge 2 charging schemes will be one
11 September 2008
South China Morning Post

The MTR is bracing for possible chaos at the end of this month as it completes the final merging operation of its two rail systems.

On the last Sunday of the month, fare concessions extended to Octopus card users since the merger between the MTR and former Kowloon-Canton Railway Corporation will be extended to the 200,000 non-users as the two charging systems are replaced by a new one.

Turnstiles at the three interchange stations at Mei Foo, Nam Cheong and Kowloon Tong which used to set the MTR network apart from the KCRC's will be dismantled.

But the gate blocks will remain until the new charging system proves to be running properly, with the MTR Corp prepared to revert to the old system if anything went wrong.

Although it says staff have done their best to prevent any problems, executives are prepared for a possible repetition of the overcharging blunders that plagued the MTR Corp during the merger last year.

General manager for marketing and station business Jeny Yeung Mei-chun said in case of any chaos with the new system the company would revert to the present fare structure.

"We carried out thorough testing on most movements within the network, but we have 82 stations and the route combinations for them all are huge, we cannot possibly test all of them," Ms Yeung said.

"If there really are problems on some special trips, such as one in which you need to switch routes five times, or other unforeseeable troubles, we can always switch back to the present system."

But the company's operations head Wilfred Lau Cheuk-man said the chance of reversion was small as unlike the time of merger, the only change Octopus card users face this time was having to pass through two fewer turnstiles.

Hundreds of passengers each were overcharged between 60 HK cents and HK$5.80, while others were undercharged because of a glitch in the fare calculation software in December. Passengers using cards are encouraged to double check the amount and report any mistake, although the corporation said its engineers would monitor the situation daily.

To ensure smooth traffic, the turnstile blocks will be covered by yellow cloths so commuters who switch lines can easily walk through.

Those seeking to leave the stations should look for green signs instead. Dozens of assistants in yellow suits and blue caps will be on hand to advise people who get lost.

With the two rail networks eventually becoming one, the MTR Corp would also extend the maximum travelling time allowed within the network from 90 minutes to three hours, but the penalty for those who break the rules would also be raised from up to HK$36 to HK$51.

Manager for corporate affairs Miranda Leung Chan Chi-ming expected the disused turnstile blocks to be removed before December.

The 3.5 million daily MTR Octopus card passengers began enjoying fare cuts of up to 35 per cent when the systems merged on December 2.

Meanwhile, commuters on a single journey ticket would still have to pay for an extra trip when they switch trains between the East Rail and the Tsuen Wan Line at Tsim Sha Tsui. This is because the tunnels connecting the two stations is considered public space and cannot be a paid area.

Students who now pay half-price fares on the old MTR network will also be able to enjoy the same benefits on East Rail, West Rail and Light Rail lines on the same day, and the minimum value-added amount on their cards will be cut from HK$50 to HK$10.
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