TNT UK aims for final-delivery business

Orange-clad postal workers are expected to hit the streets next year, putting the state-owned Royal Mail under pressure.

TNT, a subsidiary of the privatised Dutch postal group, says it wants to send postmen and women wearing orange uniforms – TNT’s corporate colour – out to deliver mail to homes and workplaces in selected cities.

The company already handles more than 5 per cent of UK mail, through contracts with business customers to collect and sort their post before handing it overfor delivery by Royal Mail under so-called “downstream access” arrangements.

Nick Wells, chief executive, said the company had adopted a dual strategy of using downstream access while developing its own collection and delivery service.

“We feel confident we can continue to sustain growth in access while introducing serious end-to-end competition in some areas,” he said.

In the year since the postal market was fully opened to competition, Royal Mail’s competitors have won more than 10 per cent of the market for collecting and sorting post – mainly from big business. Almost all of this post is subsequently passed on to Royal Mail for final delivery, leaving the former monopoly still controlling 97 per cent of the revenues.

Postcomm, the regulator, has encouraged the growth of postal delivery services to open up the postal market. But TNT said there rem-ained significant obstacles to the emergence of full competition through end-to-end services.

Its biggest complaint is over the Royal Mail’s contracts which require rival operators to hand over all their post for final delivery. A company that organised its own deliveries faced “huge surcharges”, according to Mr Wells, who has asked Postcomm to investigate the arrangement. The company hopes to generate enough business to outweigh the charges.

“We took the decision to accept the contract warts and all to get started with access in 2004,” said Mr Wells. “But unless the contract is renegotiated, it will block the development of end-to-end services.”

Royal Mail said access charges were calculated assuming that the mail handed over was for delivery to a broad range of postcodes.

If postal operators wanted to retain easy-to-deliver mail, it could not expect Royal Mail to deliver items to areas where delivery costs were much higher without extra charges, it said.

Mr Wells said Royal Mail proposals to introduce “zonal pricing” for bulk mailers would allow it to undercut rivals by charging lower prices in the cities where competitors would start providing end-to-end services. The proposals are with Postcomm which has yet to make a decision.