Postcomm’s “Blueprint for Royal Mail’s inexorable decline ”
Postcomm’s proposals would – if implemented – lead to the inexorable decline of Royal Mail by ensuring it cannot compete in the open market, the company warned today.
Royal Mail also said that Postcomm’s proposed massive extension of regulation into all aspects of its pricing would threaten the Universal Service and encourage widespread cherry-picking by rivals from April next year. The company added that, unless the proposals are substantially changed to give Royal Mail a level playing field, it will have no alternative but to go to the Competition Commission.
Royal Mail chairman Allan Leighton said: “These proposals will literally starve Royal Mail of vital investment and so wreck the quality of service we have fought so hard to improve. We cannot accept them. It’s as simple as that.”
Mr Leighton added: “Royal Mail’s postmen and postwomen have achieved a fantastic turnaround and are now delivering the best quality of service in a decade. These proposals are a kick in the teeth for our people. They destroy the hard-won gains on quality of service and push Royal Mail back into a spiral of decline.”
Postcomm’s proposals would:
· Starve Royal Mail of funds needed to modernise its operations leading to the inexorable decline of quality of service
· More than halve Royal Mail’s profits from current levels – even if the company becomes more efficient than major rivals who have invested billions in automating their operations
· Bar Royal Mail from reflecting its costs in its prices making it impossible to compete in the profitable business market – where rivals will focus their efforts
· Force Royal Mail to subsidise competitors by compelling it to carry rural letters at a loss – leaving rivals to cherry-pick mail that is easy to deliver – and so threaten Royal Mail’s ability to maintain the Universal Service
· Increase further the crippling losses on stamped mail – already among the lowest priced in Europe
· Dramatically increase regulation across Royal Mail’s businesses, stifling innovation and damaging customer service
· Write off more than £2bn of public assets by slashing the value of the business
· Limit Royal Mail’s return on sales to less than 5% compared with 22% for TPG of the Netherlands and 16% for Deutsche Post
· Open the UK market at least three years before the rest of Europe – leaving Royal Mail vulnerable to more profitable competitors
· Put Royal Mail’s pension fund, which has a £2.5bn deficit, at risk from lack of funding
Royal Mail has always said that it welcomes competition as long as it is fair. The company called today for a properly liberalised and deregulated market in which it can compete on its merits. Postcomm’s proposals tilt the playing field massively in favour of Royal Mail’s rivals – whether those companies are efficient or not.
Chief Executive Adam Crozier said: “Royal Mail has consistently said it welcomes competition as long as it is fair. But with just over six months to go before the postal market is open to full competition, the regulator is proposing a pricing regime that starves Royal Mail of investment, denies us flexibility against competitors who can charge what they like and puts a brake on further improvements in quality.
“Royal Mail has been asking Postcomm to take off the handcuffs and let us compete. Instead, they’ve put us in a straitjacket.
“Postcomm is threatening to more than halve Royal Mail’s profits and to limit its return on sales to less than five per cent compared with nearer 20% for its major European rivals. With our market opening at least three years earlier than the rest of Europe, they already have a huge advantage.”
““Put simply, we do not believe that the effect of liberalisation in the postal services market has been properly understood by the regulator. What Postcomm is proposing leads only to the distortion of the free market.
“The regulator’s proposals amount to a blueprint for the decline of Royal Mail. We will fight these proposals very hard indeed. They are totally unacceptable,” said Mr Crozier.
ENDS
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