The Vertical Cartel

Modern elevator bank inside a high-rise building, illustrating the elevator industry and long-term maintenance market.
Elevators are more than building infrastructure: installation can lead to decades of recurring maintenance revenue. Photo: Connor Scott McManus /Pexels

How a Handful of Firms Turned Vertical Transport into a Maintenance Annuity

On 29 April 2026, Finland’s KONE Corporation and a consortium led by Advent International and Cinven announced an agreement to combine KONE with Germany’s TK Elevator (TKE), valuing TKE at €29.4 billion in enterprise value. KONE’s July half-year report says filings had been submitted or were under way in all key jurisdictions, and that completion is expected no earlier than the second quarter of 2027. On 11 August 2026, KONE said the US Department of Justice had opened an in-depth review, according to Börsen-Zeitung and Bloomberg Government. On 22 September, the UK Competition and Markets Authority invited comments as an initial information-gathering step; at that stage it had not launched a formal Phase 1 investigation. On 7 October, the Competition and Consumer Commission of Singapore published the proposed acquisition notification and took public feedback until 20 October.

The deal raises a question beyond the transaction itself: when the same companies install elevators and maintain them for decades, how easily can a building owner switch providers?

The industry’s major international participants compete across three distinct activities: new installation, modernization, and maintenance. Otis Worldwide, KONE, Schindler Group, and TK Elevator are among them, although their relative positions vary by geography.

The Maintenance Engine

At Otis, the Service segment is the larger and more profitable business. In 2025 it generated 65% of net sales and 91% of the combined operating profit of the company’s two segments, according to Otis’s annual filing. The segment combines maintenance, repair, and modernization, so these shares measure lifecycle service, not maintenance alone. It generated $9.442 billion in net sales, up from $8.894 billion the previous year, at a 25.1% operating margin. Maintenance and repair brought in $7.584 billion of that total and modernization $1.858 billion. Otis maintains roughly 2.5 million units worldwide.

KONE’s Annual Review puts service at about 42% of its €11.2 billion in 2025 sales, from a maintenance base of about 1.8 million units. It describes customer relationships as typically long and stable, with an annual retention rate of about 90%, and says digitalization is increasing customer stickiness. The transaction announcement says the combined group would generate approximately 65% of its sales from service and modernization, which it describes as recurring.

Retention shows durability, not its cause. Satisfied customers, binding contract terms, and barriers to switching would all produce the same number.

The mechanism is conversion. Otis’s filing says it grows its maintenance portfolio by converting newly installed units into maintenance contracts, by winning units from other providers, and through acquisitions. Its portfolio includes equipment from other manufacturers as well as its own. Owners do move, then, and Otis does capture. The filing does not say how many of each, and that ratio is the question.

The Architecture of Dependence

Whether a captured customer stays captured depends on access: diagnostic data, technical information, tools, and replacement parts. KONE says about 40% of its service base was connected at the end of 2025, and it ties digitalization to customer stickiness. Connectivity is a measure of adoption, not proof that independent providers are shut out.

Design and software raise the same question. Machine-room-less (MRL) designs, including KONE’s MonoSpace, introduced in 1996, place the hoisting machinery inside the shaft rather than in a separate machine room, changing how technicians service the equipment. Schindler’s PORT destination-dispatch system groups passengers by destination, adding software to building transport. In each case, the competitive question is specific: can an independent provider obtain what it needs to maintain that system?

In their Singapore notification, the merging parties argue that it can. They say independent service providers are substitutes, that barriers to entry are low, and that elevator maintenance contracts are time-limited and re-tenderable, with break rights or short renewal cycles. They report low or no switching costs and say customer data such as service history is portable between providers. These are the parties’ submissions, not findings by the regulator.

Regulators have examined the testable part of that claim before. In Singapore, the competition authority investigated complaints that lift-parts suppliers were refusing to supply spare parts for lifts in public housing estates. Its 2017 consultation explained the concern: if suppliers withhold essential proprietary parts from third-party maintenance contractors, those contractors may be unable to compete effectively for maintenance contracts. The 2016 case against E M Services closed after it committed to supply parts of its brand to third-party contractors. In March 2018, the authority finalised similar commitments from BNF Engineering and C&W Services Operations, saying they fully addressed its concerns for those brands, and said its other investigations into access to essential parts would continue. None of these cases involved the four major manufacturers. They show that parts access has been a live competition issue in lift maintenance, serious enough to produce binding commitments.

The Shadow of Historical Misconduct

The industry has a documented history of anticompetitive conduct. In February 2007, the European Commission fined the Otis, KONE, Schindler, and ThyssenKrupp groups a total of more than €992 million for cartels in Belgium, Germany, Luxembourg, and the Netherlands. In 2011, the General Court reduced fines imposed on companies in the ThyssenKrupp group while upholding those imposed on the Otis, KONE and Schindler groups.

According to the General Court, the infringements consisted mainly of competitors sharing markets by allocating tenders and contracts for the sale, installation, maintenance, and modernisation of lifts and escalators. The Commission drew the link this article examines. It warned that the damage could last twenty to fifty years, because the company that installs a lift often maintains it, so rigging installation distorted the maintenance market for years afterwards. That was the Commission’s warning at the time, not a measurement of today’s market.

That is the sense in which this article’s title uses “cartel.” It is a historical finding, not a current one. It does not show that today’s service pricing is collusive, and the proposed KONE and TKE transaction is a separate matter under current review.

The Test

The record supports a narrower claim than the subtitle’s metaphor suggests, but a real one. Service is the larger and more profitable business at Otis and a large recurring business at KONE. Otis converts installations into long-running contracts, as its filing says, and the industry’s documented cartel targeted both installation and maintenance. What the record cannot yet show is whether those contracts are captive. The merging parties say they are not. Authorities in the United States and Singapore are examining the deal, while the UK Competition and Markets Authority has invited comments as an initial information-gathering step. The evidence that would settle it is switching rates, access to parts and data, and results when contracts are put out to tender.

Revenue shows that service is valuable. Only evidence on switching can show whether it is contestable.

Sources

Yogendra Singh
Yogendra Singh

Yogendra Singh is the founder and editor of Structural Signals, an independent publication covering long-term trends in technology, economics, energy, geopolitics and society.

Articles: 139

Leave a Reply

Your email address will not be published. Required fields are marked *