UK regulator expresses concern over Hitachi-Thales rail signal deal

LONDON (Reuters) - Britain's competition regulator said Hitachi's 1.7 billion euro ($1.8 billion) acquisition of Thales' signalling business could raise the costs of upgrading the country's rail network, and it needs the companies to address its concerns.

The Competition and Markets Authority (CMA) said Japan's Hitachi Rail and France's Thales SA's Ground Transportation business were leading suppliers of signalling for mainline and urban railway networks, along with Siemens and Alstom.

"We have provisionally found that, should the merger go ahead, it would reduce the number of signalling suppliers in what is already a highly concentrated industry, and the resulting loss of competition could leave transport networks and passengers worse off," the CMA said on Thursday.

"We will now consult on our findings and on how Hitachi and Thales might address our concerns, in a way that protects passengers and delivers the government's objective for a more reliable, efficient and modern railway."

Hitachi Rail said it was "disappointed" by the CMA's provisional findings and it would closely examine how it could respond to its concerns.

"Hitachi remains of the firm view that the merger will not substantially lessen competition for UK signalling projects," it said in a statement.

"Our focus now is to find the best potential mitigations and an appropriate way forward."

Submissions to the consultation should be made by June 29, the CMA said.

($1 = 0.9341 euros)

(Reporting by Paul Sandle;Editing by Elaine Hardcastle)