Royal Mail a global also-ran, claims rival

Royal Mail has left it too late to become an international business, the chief executive of its main rival said yesterday.

Peter Bakker, head of TNT, the Dutch postal business, said that it would be difficult for Royal Mail to catch up after years of expansion by other operators such as his own company, Fed-Ex and DHL.

He said: “It is probably too late for them now. If you went back to 1985, everyone would have said that Royal Mail was the best mail business. The Government should have allowed privatisation then.”

Royal Mail has one international business, a European parcels operation, while its rivals are active across large parts of the world.

TNT said yesterday that it would accelerate its moves into developing markets such as China, India and Brazil. The group, which now deals with one billion items of UK mail a year, believes that it can provide infrastructure and mail services as the postal market develops on the back of strong industrial growth. Last year, international businesses contributed 75 per cent of TNT’s EUR10 billion (GBP6.7 billion) revenues.

Royal Mail hit back, saying there was not as much competition in comparable countries as there was in the UK, where the market was fully liberalised. It said: “There is virtually no competition allowed in other major postal markets and certainly nothing like the open competition that we have seen in the UK. Where Royal Mail has succeeded hugely in Europe is in the unregulated parcels business where our subsidiary, GLS, is among the most admired in the sector.”

Mr Bakker also gave warning that TNT could quickly double its UK market share if Royal Mail lost its VAT exemption. The European Commission is investigating whether it is permissible for incumbent mail operators to be exempted from VAT by their governments when rivals have to charge the tax.

Mr Bakker said that TNT would be able to secure more lucrative contracts if it were able to compete on level terms with Royal Mail. He said: “We have to charge VAT and Royal Mail doesn’t. Some large organisations sending a lot of mail — such as banks and government departments — can’t deduct VAT so we are at a disadvantage with that work.”

TNT is trialling its own network of business mail delivery workers in several UK cities in a further challenge to Royal Mail. Other rivals use Royal Mail for the last-mile delivery.

The Dutch group’s profit from continuing operations last year rose 7.5 per cent to EUR828 million. The company is attempting to cut costs in the Netherlands and is replacing full-time jobs with part-time positions. The cuts are being imposed as TNT’s domestic market is contracting. Rivals are moving into the business segment and general volumes are falling with increased use of e-mail.

— Royal Mail is set to call for an easing of regulatory controls in a move that could add up to 6p to the price of first-class and second-class stamps.