Royal Mail set to ‘lose a third’ of its market when letter monopoly ends
The Royal Mail is to face a three-way battle for customers and will lose up to a third of its revenues, one of its main rivals is predicting.
Peter Bakker, the chief executive of Dutch post and logistics group TNT, says he expects at least two serious rivals to emerge to Royal Mail when its monopoly on letter delivery ends next year. Each, says Mr Bakker, will take 10 to 15 per cent of Royal Mail’s business.
He was speaking as another of the expected challengers to Royal Mail, Deutsche Post, was revealed as the suitor of Exel Logistics, the UK delivery group.
Deutsche Post will make a bid of around pounds 12 a share in the next fortnight, paying pounds 3.5bn for Exel, so long as chief executive John Allan and his board recommend the offer.
Switzerland’s Kuehne & Nagel has ruled itself out of bidding while Mr Bakker hinted that TNT would not make an offer, due to anti-trust issues. The only other likely rival bidder for Exel, US giant UPS, is considering entering the fray.
Deutsche Post already owns Business Post in the UK.
Both Deutsche Post and TNT are already making inroads into the UK postal market, though mostly in what is known as the ‘access’ area. This is where post is collected from business clients, scanned and sent to regional centres, where it is then passed to the Royal Mail for sorting and delivery.
Mr Bakker said his group soon hopes to be in the ‘consolidation’ area, where TNT will sort mail but Royal Mail staff still deliver. It is installing high-tech sorting equipment in its 69 regional hubs in the next few months.
The final part of the process, delivery, was described by TNT’s UK head, Nick Wells, as the most tricky. This would have TNT delivering its own post, and could see it hiring thousands of its own delivery staff.
Mr Bakker said that, based on his experience in Holland, where deregulation is more advanced than in the UK, Royal Mail will face at least two competing networks and will lose up to 15 per cent of its work to each.
TNT and Deutsche Post would be competing mostly in business-to-consumer and business-to-business mail, not really in what is known as social mail.
The UK is unsual in Western Europe in that volumes of mail are still rising. It is expected that this will peak in the next couple of years and that the market will start shrinking by 2 to 3 per cent a year, which is the normal pattern elsewhere.
Royal Mail said it did not want to comment on what its rivals were saying.
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