City & Business: Competition? It's just a game of monopoly

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The Independent Online
Just over 10 years ago, on 19 May 1986, the Government approved the sale of the 62 subsidiaries into which the National Bus Company had been split.

Privatisation hardly went smoothly. Often, sale decisions came down to executives at merchant bank advisers Barclays de Zoete Wedd poring over maps of the new bus regions, with NBC chairman, Christopher Campbell, at the other end of the telephone.

The problem, put simply, was lack of interest - save from a canny few. The process had barely started when the industry, led by Stagecoach and early buyouts such as Badgerline, started to re-amalgamate, and fast.

A rule of thumb was improvised: it would be anti-competitive to sell one firm to another whose operations were directly alongside on the map. If they touched at the corner, though, it would be all right. Sadly, the regions were not carved out like squares on a chessboard. So, farcical as it seems, competition policy in practice involved measuring with a ruler whether bidders' areas touched just gently or with a surrounding embrace.

All this save in London, where the prospect of roads jammed with buses, leapfrogging each other in the initial cut-throat race for passengers, was too close to the seats of power for comfort.

Last week, the final big move in the game took place, with Cowie Group's pounds 282m purchase of British Bus, the last big independent with which to play gobble up your neighbour. In the meantime, most of the initial frenetic competition has settled down to cosy monopolies. Since 1986, fares have risen 80 per cent, well ahead of inflation, revenues 40 per cent to pounds 2.3bn, but passenger journeys have dropped by 22 per cent.

The danger now is that the same will happen with rail. Bus firms are already making the running in rail privatisation and management buyouts will inevitably be mopped up, creating obligatory fortunes along the way. Firms such as Stagecoach are motivated primarily by profit, not service, and will squeeze costs and raise fares as far as they can.

Swapping a state monopoly for private monopolies, this time across bus and rail, is a wonderful waste of taxpayers' money, but in this - at least - the Conservatives have been consistent.

Merchant mischief

"What utter nonsense," was the forthright reply from the newly knighted Sir John Craven over City rumours last week that all was not well at Deutsche Morgan Grenfell over recent large-scale poaching of staff from rivals.

Talk, in particular, was that Sir John himself was so unhappy at the huge salaries and guaranteed bonuses paid to DMG's new brokers, he was considering his own position at the German-owned City flagship. "He is less than happy at Deutsche. There are quite serious tensions at DMG about the management style and whether this cheque-book ap-proach to acquiring market share is the way to go," one senior banking source, with no obvious axe to grind, said last week.

The issue has certainly set the City astir, with a rack of rivals condemning DMG's aggressive poaching at seven-figure salaries that put the utility "fat cats" firmly in the shade. DMG, meanwhile, puts it down to hypocritical whingeing.

But "mischievous", as Sir John puts the latest talk, or not, friction - or jealousy - between the different arms of City merchant banks is nothing new. Sir John, doyen of the bank, now spearheads the corporate finance side, while the top salaries are going to DMG's belated push into the UK and global equity markets. It might still be worth watching this space for the fall-out, and seven-digit pay-offs.

What about Alf?

More on outrageous City pay. A new survey this weekend by information specialists Hemmington Scott finds the board of Schroders, London's last big merchant bank to escape foreign clutches, to be the best-paid bunch in the country.

The average salary of an executive hired hand of the Schroder family comes to pounds 627,583. And the total pounds 7.6m paid last year amounts to 0.31 per cent of the firm's value, far ahead of anyone else and double the likes of Tate & Lyle, Burton or Pilkington.

The wage packet of Jim Fifield, the US head of soon-to-be-demerged EMI, can hardly be music to the rest of his board's ears. He made nigh on pounds 6.7m last year, more than BSkyB's Sam Chisholm (pounds 4.3m) and Lord Hanson (pounds 1.4m) put together. The rest of the Thorn-EMI board made (just) pounds 341,750, on average, apiece.

But spare a thought for the bottom end. At the lowest paying 26 firms, 130 directors received an average pounds 5,085 a year - what a Schroders director earns in just a couple of days.

At Greenwich Communications, chairman Alf Stirling received nothing last year. Ample reward for selling satellite TV equipment in Portugal of all places?

Legal winners

Two weeks ago, we reported on what appeared to be various discrepancies between what quoted healthcare firm Anagen had told the market and its actual record to date. The requisite legal letter, courtesy of City law firm McKenna & Co, duly arrived.

It asked us to give full opportunity to the company to respond in future. Well, we had and we have. Over the last fortnight, before our further report below, we have asked the firm to respond, finally sending Anagen a list of pertinent questions last Monday.

On Friday, another letter from the legal eagles duly arrived: "The questions put our client in an impossible position," it opines.

"The answers to the questions constitute information which is both market- and price-sensitive. If our clients answer these questions, they will be running the risk of breaching the stock exchange rules," it goes on, with the usual threats of writs.

Damned if you do and damned if you don't, it seems, for the company and journalists alike.

Well, this week Anagen will have full opportunity to answer questions and give full information where it counts: to shareholders at its annual general meeting. Firms like this, which have yet to show a profit, would do well to spend their time and money doing that, rather than on legal missives. Otherwise, as ever, only the lawyers win.

Copies of our (unanswered) questions, meanwhile, are here for any shareholder who cares to apply.