Royal Mail welcomes UK regulator’s move for early liberalisation of post market
Royal Mail threw its support behind the UK regulator's decision to open the postal service market to competition in January next year, 15 months ahead of schedule.
'We're ready,' said Royal Mail chief executive Adam Crozier.
'We recognise that the regulator is getting on with his job, and welcome faster competition as long as it comes without unfair restrictions on Royal Mail,' he added.
Postcomm's decision, which was ahead of the original timetable of April 2007, will end Royal Mail's over 350-year monopoly of the UK market.
The decision means that from 2006, licensed companies other than Royal Mail will be able to collect, transport and deliver letters and charge customers for the service.
Crozier said what it now wants to find out is how the transition to full competition will be carried out.
'Royal Mail wants to be able to compete fully and fairly from the start. We're determined to earn business in the new market so that we can continue to finance the one-price-goes-anywhere universal service – which remains at the heart of what we do. We can only do this if the handcuffs come off,' he said.
Royal Mail, formerly known as Consignia, currently dominates the UK licensed letters market, which is worth around 4.5 bln stg per year.
In a free market, Royal Mail will still be required to provide a universal postal service for first and second class mail of one delivery and one collection each working day at a uniform price throughout the UK, and provide a business mail service on universal service terms, Postcomm said.
Shares in Royal Mail's rivals Business Post PLC and DX Services PLC surged following Postcomm's decision.
At 10.35 am, shares in Business Post, the express mail delivery group, were up nearly 3 pct at 704-1/2 pence.
Shares in DX, the demerged mail business of personnel group Hays PLC, were up 1-1/2 at 368 pence.
Royal Mail seeks freedom to compete
Financial Times UK, London Ed2, p 4 02-19-2005
By By REBECCA BREAM
Royal Mail has said it should be given more freedom from regulations so that it can properly compete in a liberalised postal market.
Adam Crozier, Royal Mail chief executive, said the group should be allowed to react to the new market without the "handcuffs" of regulation.
The state-owned group gave a cautious welcome to the announcement by the regulator Postcomm yesterday that the postal market would be fully liberalised from the start of next year, bringing it forward from the original date of April 2007.
Since, liberalisation was proposed in 2002, Royal Mail has ditched its ill-fated Consignia re-branding, hired a new management team, restructured operations and turned a Pounds 1m-a-day loss into profit. Postcomm said Royal Mail was now fit to face competition, so the deadline should come forward.
Since January 2003, 30 per cent of the market, covering bulk business mail in batches of at least 4,000 letters, has been open to new entrants. Business Post of the UK, TNT Mail, owned by the Dutch post office, DHL Global Mail, owned by Deutsche Post of Germany and Express Dairies have set up postal businesses in the UK, although their share of the Pounds 4.5bn market remains less than 1 per cent.
But the regulator and Postwatch, the consumer watchdog, have expressed frustration at the slow pace of change. Thursday's announcement was a reflection that Postcomm is prepared to take drastic measures to shake Royal Mail out of what it sees as an incumbent's complacency.
Mr Crozier said of the coming liberalisation: "We're ready. We welcome faster competition as long as it comes without unfair restrictions on Royal Mail."
Royal Mail says it is unfair that its prices are regulated by Postcomm while its competitors are free to set their tariffs. The group argues that if it is to preserve its universal service, delivering letters to all addresses in the UK for a single price, it will need to be allowed to make money on all of its activities.
Stamped mail sent by domestic users is loss-making, Royal Mail says, and stamp prices are subsidised by business mail. As rivals increasingly target business customers, Royal Mail wants to be able to set its own prices for business mail in order to compete. It will push for rises at the next round of stamp-pricing talks with Postcomm later this year. It is also campaigning for a shift to a pricing system based on size rather than weight. It says light but bulky items cost more to handle as they cannot be machine-sorted.
Mr Crozier is overseeing a review of business mail products in order to compete with the new entrants. "Our current portfolio of products were designed on the basis of how Royal Mail works, not on how our customers operate," the group said. New products could include traceable letters and letters delivered on a specified day.
Paul Carvell, chief executive of Business Post, said the new deadline for liberalisation was encouraging but did not affect his strategy. Business Post offers bulk business mail through an access agreement with Royal Mail: Business Post collects and sorts the mail, Royal Mail delivers it.
After liberalisation Business Post will start aiming for small and medium business customers, which do not send enough mail to benefit from Royal Mail's preferential rates. Business Post says it should be able to undercut the incumbent. Business Post also plans to install post boxes in busy locations such as supermarkets.
However, entrants to the market concede that Royal Mail's 99 per cent share will take time to erode. Mr Carvell said his company would have a 3 per cent market share by 2007 compared with a Royal Mail share of around 90 per cent.
TNT Mail said Royal Mail's retention of VAT exemption gave it an automatic price advantage over rivals. "There are still significant barriers to competition," the company said.
Meanwhile, the Communication Workers' Union has questioned why Postcomm is opening the UK market before most European countries have opened theirs.
Billy Hayes, general secretary of the CWU, said: "The Dutch and German post offices are being allowed the opportunity to compete head-on with Royal Mail while enjoying strong protection in their home markets."
Royal Mail Press Release
“We’re ready” says Royal Mail as market opening brought forward
[18/02/2005]
Royal Mail today said that the decision by postal regulator Postcomm to completely liberalise the UK’s postal market in January 2006 marked a new phase for everyone in the postal industry.
“We’re ready,” said Chief Executive Adam Crozier. “We recognise that the Regulator is getting on with his job, and welcome faster competition as long as it comes without unfair restrictions on Royal Mail.
“What we now want to see is a successful transition to full competition. For customers, that means proper safeguards to avoid a damaging free-for-all and to ensure that all mail is secure, and that it is clear who has collected and delivered it and who is responsible for sorting out problems.
“Royal Mail wants to be able to compete fully and fairly from the start. We’re determined to earn business in the new market so that we can continue to finance the one-price-goes-anywhere universal service – which remains at the heart of what we do. We can only do this if the handcuffs come off.”
Postcomm currently regulates 90% of Royal Mail’s revenues and controls the price and terms and conditions for nearly all its mail services, including bulk services aimed only at big business customers. No such restrictions will be placed on other providers of postal services. At present Royal Mail’s stamp prices are substantially lower than true costs for stamped mail. Many bulk business services are priced higher than costs to subsidise stamped mail.
“Royal Mail must have the freedom and flexibility to set the right prices, based on real costs,” said Mr Crozier. “If that happens, I think the new competitive environment will succeed. Competitors are already targeting profitable business mail. We need to compete with them on price as well as service if we are to keep the universal service in business.”
Ends
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