Business Post Chief Executive predicts UK Royal Mail will have 80% market share

Paul Carvell, Chief Executive of Business Post Group plc, has predicted that, following liberalisation of the postal market, Royal Mail will retain a profitable 80% share of the UK market.

Mr Carvell said that the 20% which the Royal Mail would lose would fall into two categories. Some 15% would probably be shared by four competitors which would provide a nationwide service, and a further 5% would go to city centre specialist deliverers.

Speaking today at The Logistics Event conference on the subject of “Competing for the Post”, he said that the UK domestic mail market was worth £5.8 billion per year, while the international market was worth a further £0.8 billion. Since Business Post had moved its first letter in May 2004, the company had now moved more than one hundred million letters.

“The Royal Mail has had three competitors since 2001 and it now retains a 98% market share. However, as Business Post, and others, rise to the challenge of collecting, sorting and delivering mail, this percentage will fall,” he said.

“We are already providing an excellent service for our large corporate customers. We are moving into the Small and Medium Sized business market and soon we will be into the consumer market. Business Post is currently considering a wide range of options for how it will implement its service to consumers, but we have a pretty clear idea of what this will look like.”

He concluded, “I think the consumer postal market will continue to grow, despite some substitution by emails. There is a £1 billion market opportunity out there for companies like ours and so the market will change. There will be, however, one constant. Postmen are here to stay.”

Enquiries:
Business Post Group plc
Bill Wallis / Nicole Stephens 0121 335 1190
Beattie Communications
Tracy Lloyd-Watts / Loic Echaubard 020 7053 6000

Notes to Editors
Business Post Group
Business Post Group operates through a network of nearly 140 locations across the UK. Of these approximately 30% are franchised and half are partners in the UK Pallets network. The Group and its associates employ over 5,000 people. A fleet of more than 3,000 vehicles is responsible for the movement of over 150,000 consignments every working day.

Express is the Group’s core UK business-to-business parcel service accounting for 56% of Group turnover with an estimated 8% market share.

International accounts for 12% of group turnover and is responsible for all shipments coming into and leaving the UK and Ireland. A high proportion of its activity derives from Business Post’s agreement with FedEx.

UK Mail is the first company to offer an alternative postal delivery service in 370 years of postal history. Following extensive negotiations with Royal Mail over downstream access to their delivery network, an agreement was reached in February 2004 and the service began in May 2004.

HomeServe, the Group’s UK business-to-consumer parcel service, provides high quality time-definite service to residential addresses. It accounts for 12% of Group sales and last financial year increased its turnover by 54%.

UK Today is the Group’s same day nationwide courier and logistics service. UK Today increased its turnover by 25% in the last financial year

BXTech is a technical courier specialising in field service logistics and is active in the computer, medical and utilities sectors. It was acquired as BXT in February 2003. Together UK Today and BXTech make up the Group’s Courier division.

UK Pallets provides a nationwide express palletised goods delivery service through a partnership with 70 independent haulage businesses throughout the UK. It was acquired in July 2003 and is responsible for 10% of Group turnover.
www.businesspost.biz

UK Mail posts challenge to Leighton
Independent, First, Sec. Business, p 63 06-09-2005
By MICHAEL HARRISON

If Paul Carvell is right then the ever-ebullient chairman of Royal Mail, Allan Leighton, really does have something to worry about. The chief executive of Business Post forecasts that the arrival next year of full competition will deprive the posties of 20 per cent of their market. That is twice the amount built into the regulator's assumptions and those of most other private operators. To put it further into perspective, it has taken nearly two decades for rival telecoms companies to make the same kind of dent in BT's monopoly.

To make matters even worse, the vast bulk of this lost post will be business mail since that is the only kind the new entrants into the market are really interested in handling. They can collect it, sort it, frank it and trunk it, leaving the Royal Mail with the job only of delivering it the last mile into the letter box. Royal Mail gets 13p a pop but since it is making a return of less than 9 per cent on post which it is allowed to charge 21p to deliver, it is easy to see the damage to margins if such 'access agreements' as they are known really take off.

The German and Dutch national post offices earn margins in their domestic markets which are, respectively, two and three times those being achieved by Royal Mail here. Just to rub it in, they have now begun to piggy-back on its network in the UK with access agreements of their own. If Business Post's UK Mail division can go from a standing start to handling nearly 2 million items a night in the space of 12 months, then how much more damage can the likes of Deutsche Post and TPG inflict?

The trickle of big customers deserting Royal Mail promises to turn into a stream. Look out in the next few weeks for at least one government department and a couple more high street banks chosing to jump ship.

Despite this loss of premium business, Postcomm has helpfully told Royal Mail that it cannot put up the price of a first-class stamp by more than 4p over the next five years to help protect its revenues, producing another apoplectic response from Mr Leighton. The record pounds 537m profit Royal Mail delivered last month was built in large part on price increases and the fact that competition has not yet really begun to bite. If it is not to prove the company's high-water mark, then Mr Leighton will have his work cut out. As he observed at the time with his customary understatement: 'We've a mountain to climb and we've only reached base camp.' Sherpa Tensing, where are you?

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