The DfT confirmed in February that it had invited First South Western Trains and current operator Stagecoach South West to bid for the franchise, which will run for 7-9 years with an option for a one-year extension.
MTR will take a 30% stake in the joint venture and both operators hold Pre-Qualification Questionnaire Passports with the DfT, which confirms their eligibility to bid for franchises.
An initiation to tender was issued to the two shortlisted bidders in May and bidding will begin later this month. The DfT expects to award the contract by February 2017. The new contract will start when the current deal expires in June 2017.
South West Trains currently operates 1689 weekday services on a 1044 route-km network stretching from London to Reading, Portsmouth, Weymouth, and Exeter, serving suburban, regional, and inter-city markets.
"South Western is a complex mix of shorter and longer-distance services," says MTR Europe CEO Mr Jeremy Long. "Our joint venture will combine MTR's experience of running successful London Overground and TfL Rail commuter services, and Stockholm Metro and MTR Express inter-city services in Sweden, with FirstGroup's strong track record of running commuter, inter-urban, regional and long-distance services and delivering passenger growth."
Highlights of the new franchise include the introduction of a new fleet of 30 five-car class 707 suburban EMUs, which are due to enter service from 2017 on the Windsor Line, the rollout of smart ticketing, and capacity upgrades including work at London Waterloo station to accommodate 10-car trains on more platforms.
Stagecoach has operated the franchise since privatisation in 1996. The current franchise began in 2007 and the DfT originally intended to grant Stagecoach a direct award contract for 2017-2019. However, the department decided in July 2015 that the franchise would be re-let through a competitive tender.
Ridership has more than doubled since privatisation from 108 million in 1996 to 230 million, while the train fleet has expanded from 1022 vehicles to 1449. Between 2007-08 and 2014-15, passenger journeys increased by 22% and revenues from passenger services rose by 56%. South West Trains generated revenues of £1.06bn in the 2014-15 financial year.