Former mayor Kerry Prendergast predicted Snapper would fail and have to withdraw from Wellington, costing capital ratepayers millions, if it was not allowed to expand into the Auckland transport market.
Documents obtained under the Official Information Act show Prendergast wrote to then Transport Minister Steven Joyce and Finance Minister Bill English in August 2009, while she was still mayor, asking the Government to consider the integrated ticketing system network Snapper in Auckland.
Prendergast's letter was written at a time when the former Auckland Regional Transport Authority - now Auckland Transport - was considering awarding French company Thales the contract to build Auckland's integrated ticketing network. The project has been estimated at about $110 million.
In late 2009, the New Zealand Transport Agency was reviewing its decision to approve funding for the project as a result of Snapper's complaints. Prendergast wrote that if the contract went to Thales then Snapper would essentially be shut out of Auckland because ARTA would provide the service "free" to transport operators.
"If this happens, Snapper will fail because it would never be able to achieve the scale needed to be financially viable," Prendergast said. "Auckland has about 58 million out of about 105 million public transport journeys in New Zealand. Snapper simply couldn't compete with a public-sector funded scheme and, in this event, it would more than likely withdraw from Wellington.
"The cost of integrated ticketing would then have to be picked up by Greater Wellington Regional Council."
Snapper was subsequently allowed to join the Auckland integrated ticketing network as a third party provider.
But earlier this year, Auckland Transport dumped Snapper from the project, saying Snapper missed its deadline to make its system compliant with the Thales network - a claim that Snapper denies.
Snapper CEO Miki Szikszai told the Sunday Star-Times on Thursday that Snapper would not fold as a result of being turfed from Auckland, but he could understand why Prendergast made those comments. "These are scale businesses, for sure, and volume is very important, there's no doubt about that," he said.
"We've certainly reviewed the financial position of Snapper as a result of that [Auckland] decision . . . and we see future opportunities for the business to stand on its own merits in Wellington and elsewhere in New Zealand."
Earlier this year, the Greater Wellington Regional Council set aside $39 million in its long-term plan to introduce an integrated ticketing system.
Snapper was introduced on NZ Bus's Wellington fleet without any cost to ratepayers and Prendergast felt something similar could happen if Snapper was tasked with building Wellington's wider integrated ticketing network.
Szikszai agreed with the former mayor. "The important part of her letter is that if there is not enough scale [for a private company] then the ratepayer will have to pick up the tab in Wellington.
"That's not an unreasonable prediction."
Prendergast could not be reached for comment.
- © Fairfax NZ News
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