STAGECOACH was celebrating on two fronts yesterday, as the chances of harsh regulation of its train-leasing operations faded and New Zealand's monopolies watchdog removed its earlier block on the group buying Auckland's Yellow Bus.

The Perth-based bus and rail group will now be able to participate in the auction of The Yellow Bus Company, in which rival FirstGroup will also bid.

Speculation had been rife that Deputy Prime Minister John Prescott would rein in the UK's three privatised train-leasing companies in a big way in the impending transport White Paper. Stagecoach, which owns Porterbrook, has lobbied vociferously against regulation of the rolling stock companies (Roscos).

But Prescott yesterday welcomed the publication of a report by rail regulator John Swift, which recommended that ''regulation of the rolling-stock market should be introduced only as a last resort, if problems of dominance and potential abuse cannot be successfully addressed through encouragement of further competition combined with continuing vigilance and speedy action against anti-competitive behaviour''.

Keith Cochrane, Stagecoach's finance director, welcomed Swift's views but remained guarded.

Asked if he thought the line taken by Swift would be adopted in the White Paper, expected in June, Cochrane replied: ''I think we have to wait and see. It is obviously up to the Deputy Prime Minister to form his own conclusions in light of the report. We are certainly encouraged by the conclusions of the report.''

Angel Train Contracts, the Rosco owned by Royal Bank of Scotland, was gushing in its praise of Swift's report.

It said he had made ''a significant contribution to public understanding of how the rolling stock industry works and its place in the UK's rail industry''.

Swift, who was particularly concerned about what will happen when the Roscos' 11,000 vehicles of rail stock eventually come off lease and are required by train operators to continue to run their services, proposed the Roscos should be asked to produce codes of practice voluntarily on the basis of a model he would draw up.

He rejected the idea that Roscos did not have market power but concluded that they held no long-term position of power in the financing of new rolling stock because ''there is an international market in the manufacture of vehicles and a growing competitive market for their financing''.

Stagecoach shares, which have risen six-fold in the last three years, added 9.5p to 1216p in a depressed stock market. They had been hit on Thursday by rail franchising director John O'Brien's view that only limited consolidation lay ahead in the railway industry but they have enjoyed a very strong start to the year.

Cochrane also welcomed the reversal by New Zealand's Commerce Commission of its previous decision that Stagecoach should not be allowed to acquire Yellow Bus, which operates about 550 vehicles in Auckland, because of its existing bus services in the city.

Even though the commission calculated Stagecoach's resultant market share, if it won the auction, at 90%, it concluded that Auckland Regional Council's strong statutory powers to regulate the market would prevent the Perth-based company acquiring or strengthening dominance.

Cochrane said: ''Clearly, it is a business we are interested in. We are pleased we will be able to participate in the process now.''

He declined to comment on speculation that the municipally-owned Yellow Bus would be sold for up to #40m.

Also on New Zealand's North Island, Stagecoach is considering a bid for Wellington Airport. Cochrane said it would take a look at the airport, which is being privatised, during the coming weeks.

Stagecoach took a significant step forward in scale terms last month when it added Prestwick International Airport to its empire.

Prestwick had previously submitted an offer to buy Skavsta Airport in Sweden and remains in the running.

Cochrane said yesterday that final bids for Skavsta, an hour's drive from the capital Stockholm, were due ''within the next week or two''.