Hong Kong rail merger means lower fares

HONG KONG: Hong Kong’s two major rail systems - the mass-transit underground MTR and the above-ground KCR - are to be merged, pending legislative approval, in a consolidation move that will result in lower fares for the travelling public.

Under the terms of the merger, the KCR Corporation (which is fully owned by the government) will grant a 50-year Service Concession - a lease arrangement of sorts - to the publicly listed MTR Corporation Ltd (in which the government has a 76.5% stake) for the use of its assets to operate the KCR system.

The MTR Corp will make an upfront payment of HK$4.25 billion (about $550 million), fixed annual payments of HK$0.75 billion (about $100 million) and variable annual payments from the fourth year onwards. In addition, it will pay HK$7.79 billion (about $1 billion) for the acquisition of property.