French awarded franchise to run South-east trains

France's Compagnie Generale des Eaux has won the right to run a second rail franchise in the UK, giving it control over two-thirds of British Rail's former Southern Region.

The franchising director, Roger Salmon, announced yesterday that London and South Coast Railways, a subsidiary of Generale des Eaux, was the preferred bidder for South Eastern Trains, which mainly runs services to Kent and East Sussex from London's Victoria, Charing Cross and Cannon Street stations. Last year it had passenger revenue of pounds 205m, making it the fourth biggest of the 25 rail franchises.

If, as expected, the deal is confirmed within the next fortnight, it will give the French company control of virtually all services out of London Victoria, offering the opportunity for considerable savings as it also operates Network SouthCentral, which runs trains to Sussex and Hampshire.

Last night, a spokesman for Generale des Eaux said the two franchises could not be merged into one, but there would be "obvious synergies" between the two businesses.

The allocation of the franchise means that a French-owned company will control the trains that go to Dover and Folkestone. Following the construction of the Channel tunnel all boat trains - apart from those to Ramsgate - have been scrapped. The likeliest date for the new company to take over South Eastern is 15 September. The allocation is a blow to Stagecoach, which already runs South West Trains, the third part of the old Southern Region, and was on the short-list along with GB Rail and a management buy-out team.

Mr Salmon has denied that the two-week delay in awarding the South Eastern franchise, was connected to last week's controversial takeover of the Porterbrook rolling stock company for pounds 825m by Stagecoach. However, rolling stock manufacturers will be relieved that Stagecoach, having promised to spend pounds 90m on new rolling stock, will not have control of the order for 81 trains on South Eastern which, under the terms of the franchise must take be replaced within three years.

Stagecoach may find itself banned from further bids following its takeover of Porterbrook and it may even be tempted to sell South West Trains to Generale des Eaux, thus recreating the old Southern Region.

Generale des Eaux becomes the second company to run two franchises after National Express successfully bid for Gatwick Express and Midland Main Line, though it faces an investigation by the Office of Fair Trading over the latter.

Two other franchises have gone to management buy-out teams, with Sea Containers, Stagecoach, and Prism picking up the other franchises.