Private post to go ahead despite Consignia objection

MARTIN Stanley, chief execut-ive of Postcom, made it clear he intended to press ahead with moves to open up the market for business postal collection to
private sector players from April despite furious objections from Consignia, the renamed Post Office.

Although the loss-making Consignia claims the plans by the regulator to open up the market will worsen its precarious financial position, Stanley doubts it will complete essential changes without the spur of competition.

He appears to have run out of patience with excuses for poor financial and operating performance from the group, which promised five months ago to cut costs by (pounds) 1.2bn but has yet to announce details.

“The fact they haven’t started to deliver the changes they promised is more evidence of their difficulty in changing,” Stanley told the Herald while visiting Edinburgh for a conference organised by Postwatch, the consumers group.

He said criticism of plans to allow private operators to collect bulk corporate mailings, because they would deprive Consignia of profitable business, while leaving it with heavy loss-making rural deliveries, gave a misleading impression of its business.

Although Consignia made a great deal of the fact that it costs (pounds) 2 to deliver some 27p letters, the areas involved accounted for a tiny part of its total business.

However, while clearly determined to introduce changes following the end of a consultation period on March 15, Stanley dismissed suggestions Consignia faced Armageddon.

Postcom had received approaches from companies interested in competing with Consignia in the bulk business collection market, but only a limited number might be prepared to risk heavy investment.

Private sector players will need to see firm evidence that a viable market existed before they will commit to taking on Consignia in the domestic market, which is not due to be opened up until 2006.

Stanley noted that in New Zealand and Sweden, where postal services had been fully liberalised, state-owned former monopolies still controlled more than 90% of the markets.

However, the experience in those countries, where incumbent operators had dramatically improved performance, demonstrated the benefits of the liberalisation process.

Plans to allow private companies to collect mail-shots of more than 5000 letters, which would be the first step in a process which will lead to full liberalisation of postal services in 2006, have been fiercely criticised by Consignia and trade unions.

Consignia chairman Allan Leighton insists the company needs more time to sort itself out.

However Stanley noted that in the two years since the government announced plans to liberalise the market, Consignia had turned a (pounds) 400m operating profit into a (pounds) 600m loss, despite increasing volumes and revenues.

The consultation process has two weeks to run but Stanley said he did not expect to hear anything which would make him change his mind about the basic structure of reform.