Accenture Study Reveals That a Few Companies Could Dominate Public Transportation in Germany by 2010

FRANKFURT; Nov. 26, 2002

The German public transportation sector is about to undergo a wave of alliances and mergers, according to a new study by Accenture. More than half of the nearly 100 experts from public transportation enterprises, municipal transportation authorities, associations and regional public administrative bodies who participated in the study predicted that a few companies will dominate the public transportation market by 2010, despite the fact that today there are more than 400 transportation companies, with no dominant providers.

This consolidation will result from increasing competition within the public transportation market involving busses, subways and tramways. The study also revealed that the successful management of mergers and alliances, known as horizontal integration, will play a much more important role than the improvement of internal processes in determining the overall success of transportation companies.

The primary factor driving the increase in competition is the anticipated withdrawal of funding from public administrative bodies, in addition to the increased European-wide market liberalization of municipal and regional transportation. Nearly three quarters of survey respondents (71 percent) said they believe that public funding for municipal transportation will decrease by 2010, and two-thirds (68 percent) said they believe that public transportation will be separated from municipal services and turned into independent, private enterprises.

"The underlying dilemma of public transportation enterprises is represented by the fact that only a minority of experts believe German public transportation companies will operate abroad," said Henning Todte, a partner at Accenture who leads the company’s transportation practice in Austria, Switzerland and Germany. "On the one hand, there is a desire to create private transportation enterprises; but on the other hand, governments do not want private enterprises that have complete entrepreneurial freedom."

Other key results from the study revealed the following:

• More than half of the survey respondents (60 percent) said they expect that public transportation enterprises will be privatized, although the majority of respondents (81 percent) said they did not believe that public transportation enterprises will list publicly by 2010.
• Most survey respondents (86 percent) said they expect that the increased competition will also result in a greater number of companies bidding on transportation contracts. A large majority of respondents (81 percent) said they expect that an increasing number of domestic public transportation enterprises from within Germany will participate in such biddings, and an even greater number of respondents (93 percent) said they expect that by 2010 foreign public transportation enterprises will be bidding on transportation contracts within Germany.
• In response to privatization, it will become increasingly important for German public transportation enterprises to be profitable. About 80 percent of survey respondents said they believe that, by 2010, transportation enterprises will finance themselves almost exclusively through fares, and a majority of respondents also said they expect fares to increase.
• Ninety percent of respondents said that marketing and sales should be a key competency for transportation companies, and 80 percent said that information technology (IT) should be a key competency. Respondents said that to attract customers, transportation companies must improve the collection and analysis of passenger information, improve the quality of the transportation service, enhance security and simplify fare structures.
• About two-thirds of the respondents said they believe that station service centers and technology-based initiatives such as customer cards and discount systems are better client-retention measures than traditional measures like customer magazines or mailings.
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• The majority of respondents said they believe that ticket-window sales will decrease from about 40 percent in 2005 to 28 percent in 2010, with an increasing number of ticket sales occurring through call-centers and the Internet. The majority of respondents also said they expect that electronic tickets (e.g. through mobile phone or cash-card) will become more common but that ticket-less travel by check-in-check-out or be-in-be-out is not expected to spread widely.

Methodology
The study, "Public Transport 2010," consisted of 94 questionnaire-based interviews with experts from public transportation enterprises, municipal transportation authorities, associations and regional public administrative bodies in Germany; more than half of the respondents were managing directors and executive board members of these institutions. The study was conducted in September and October 2002.

About Accenture
Accenture is the world’s leading management consulting and technology services organization. Through its network of businesses approach—in which the company enhances its consulting and outsourcing expertise through alliances, affiliated companies and other capabilities—Accenture delivers innovations that help clients across all industries quickly realize their visions. With more than 75,000 people in 47 countries, the company generated net revenues of $11.57 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.

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