First said fares would have to rise, some services were likely to be withdrawn and others would have a reduced frequency following a cut in the annual Bus Service Operators Grant (BSOG).
The company said it did not yet know how big a fare rise would be needed and it was still working out the service changes, but it expected to make an announcement in the next few weeks.
The higher fares are likely to take effect from April, with service changes being introduced in May or June.
Last week, the Evening News revealed Lothian Buses, the region’s biggest bus operator, is set to increase fares and reduce services next month because of the grant cut and a drop in passenger numbers caused by city centre tram works.
The price of a single adult ticket is expected to rise by 10p to £1.40 and a day ticket by 20p to £3.40.
The government has cut funding for the BSOG by 20 per cent and payments are no longer based on how much fuel buses use, but how many kilometres they travel – a change favouring rural operators at the expense of those in urban areas.
First increased its bus fares in Aberdeen by ten per cent last week – the second rise in six months – as a result of the cut.
Paul Thomas, managing director for First Scotland East Limited, said the purpose of the BSOG had been to keep fares down. He said: “As a result of the cut in funding for the Bus Service Operators Grant recently announced and possible future changes in Concessionary Travel Scheme payments across Scotland, First Scotland East is undertaking a comprehensive review of bus services throughout south-east and central Scotland.
“It is inevitable, that the reduction in funding will lead to increased fares and service reductions. However, at this time, no changes have been decided for Edinburgh and the Lothians.
“We will try where possible to minimise the impact on our customers, but the significant cuts are a considerable blow.”
City council leader Jenny Dawe is to raise concerns about the BSOG cuts and the effect on council-owned Lothian Buses with Transport Minister Keith Brown. Labour’s Lesley Hinds asked her at last week’s council meeting to approach the minister about the matter.
Councillor Dawe said: “I am happy to express our concerns about the issue. Lothian Buses has always looked very carefully at grants and takes careful considered decisions on its business plan. I think this one has had one of the greatest impacts of any single measure in recent years.”
Transport Minister Keith Brown said: “We would expect the bus industry in Scotland to act responsibly whenever they are looking to set bus fares.”