The franchise runs for eight years, with the final two dependent on the company meeting performance targets, and covers Kent, parts of East Sussex and South East London.

It will also include new high speed commuter services from London's St Pancras station that will use the Channel Tunnel Rail Link from 2009.

The franchise attracts a government subsidy of 585 mln stg over its eight year life and Go-Ahead said it expects the franchise to generate annual revenues of 560 mln stg from the start, including government subsidies.

Services in the area have been run by South Eastern Trains, which is owned by the Strategic Rail Authority, following the termination of the Connex South Eastern Franchise in November 2003.

The government said the franchise area has already had about 700 mln stg invested in new rolling stock and improved infrastructure and some 250 mln stg will be invested in new high speed trains for the Channel Tunnel Rail Link.

The DfT added: 'Given investment in the region the new operator will increase fares by 3 pct above inflation from January 2007 for five years to ensure there is a fair balance in cost between the taxpayer and fare paying passenger.'

Also bidding for the franchise was a joint venture between DSB International and Stagecoach Group PLC, FirstGroup PLC, and a joint venture between GNER Holdings and MTR Corp.

'We submitted a robust and competitive bid and are confident that real benefits will be delivered for passengers in terms of improved services, punctuality and reliability,' said Go-Ahead chief executive Chris Moyes.

Keolis is owned by French national railway operator SNCF and the company's management.