Transport for Wales has pre-qualified four bidders to run rail services in Wales and the Borders from 2018.
The shortlist includes Abellio Rail Cymru, Arriva Rail Wales/Rheilffyrdd Arriva Cymru Limited, KeolisAmey and MTR Corporation (Cymru) Ltd.
Transport for Wales, a not-for-profit company wholly owned by the Welsh Government, is looking for an Operational and Delivery Partner (ODP) to operate services on its behalf using a model it has likened to that adopted by Transport for London (TfL).
The franchise is currently run alongside the Department for Transport (DfT), but it will be fully devolved to the Welsh Government next year.
A public consultation will examine the proposals early next year and the contract will be awarded by the end of 2017.
In a statement, Economy and Infrastructure Secretary Ken Skates said: “We now have four highly skilled, experienced companies entering the next, competitive phase and I am keen to hear more from them about what they can offer Wales and how they can deliver on our plans for integrated public transport.
“Over the next 10 years, I envisage significant strides in the delivery of our public transport network including the electrification of the Swansea, Valleys and North Wales lines, a South and North Wales Metro and widespread structural improvements that are already in the pipeline.
“The priorities for the next franchise will include updated rolling stock, reduced journey times and the use of modern technology and approaches to deliver an improved service for passengers across Wales.”