Is one subway system better than two?
The subway system now known as Tokyo Metro began as a private entity in 1927, when it was just one line between Ueno and Asakusa. It eventually morphed into the Eidan subway system, which was a public company. Then it went back to being private in 2004, though 53.4 percent of its stock was held by the central government and 46.6 percent by Tokyo Prefecture. Tokyo Metro’s management had originally hoped to list the company on the Tokyo Stock Exchange sometime between 2007 and 2009, but according to the business magazine Toyo Keizai, they put it off due to the recession, thinking they could raise more money if they waited until the economy picked up.
Now maybe they’re wondering if they should have gone for it. At the most recent shareholders meeting in the Tokyo metropolitan government, vice governor Naoki Inose proposed that Tokyo Metro merge with the city’s other subway system, Toei, to form one big underground railway. Toei is completely public and owned by Tokyo. It is a much newer system than Tokyo Metro and still carries a cumulative debt of ¥443 billion, which is why the management of Tokyo Metro balked at Inose’s suggestion. Toei finally started showing a pretax profit in 2006 and finished all construction in 2008, but that amount of red ink makes for some heavy depreciation, and if the two subways merged the joint stock price would be much lower than what Tokyo Metro could expect on its own, which is estimated to be about ¥600 billion. Consequently, Metro wants to list before any possible merger in order to make as much money as possible.
A delay would be better for Metro’s stockholders, but Inose is saying that a merger is better for patrons. Because of its debts, Toei’s fare schedule is higher than Metro’s. The “entry fare” (hatsunori) is ¥170 for Toei and ¥160 for Metro, and though it’s only a ¥10 difference, Toei’s entry fare only lasts up to 4 km, while Metro’s is good for up to 6 km. These ratios apply up the line, and by the time you get to the top fares, Toei’s is ¥110 more than Metro’s. Inose says that if the two systems were merged, their fares would automatically “unify,” meaning Metro’s would stay the same and Toei’s would actually drop.
Inose, who many believe has his eye on the Tokyo governorship once Shintaro Ishihara eventually steps down, is counting on Tokyo Metro to do the right thing for the people of Tokyo. Though as a private company Metro has a responsibility toward its stockholders, half of those stockholders comprise the government of Tokyo, which runs Toei. And as some analysts say, after they merged it would only be a matter of time before the stock rose to very high level, since no more construction is planned for the next 10 years. All they have to do is run trains, pay off their debt and make lots of money.