Royal Mail seeks new price deal to compete with TNT

The UK postal regulator is expected to meet Royal Mail executives in the coming weeks to discuss ways of easing the group’s financial troubles, The Observer reported.

Royal Mail’s interim profits have slumped to 22 mln stg from over 100 mln stg.

The Observer said PostComm officials will examine whether arrangements that allow rival distributors such as TNT and DHL to compete for bulk mail business should be altered to give Royal Mail more pricing flexibility.

Licensed operators that carry bulk mail from companies such as banks, utilities and government are allowed to use Royal Mail’s local delivery network for a charge of 13 pence an item currently, the report said.

PostComm figures show that in the first two years of competition from 2004, the Royal Mail’s market share fell by 3 pct, The Observer said. However, Royal Mail claims the figure has risen to more than 10 pct in the past year.

The report said the group wants to be allowed to lower prices to compete. It can do this, but it must also maintain the margin available to competitors.

Royal Mail told The Observer this allows rival to continue to undercut its prices as their costs fall.