Royal Mail on the warpath as regulator limits charges to rivals

Plans by the postal regulator, PostComm, to limit how much Royal Mail can charge rivals to use its network have been attacked by Allan Leighton, the company’s chairman as “unrealistic, flawed and totally unacceptable”. Leighton says that these latest proposals, along with separate caps on postage prices, will cost Royal Mail pounds 760m and will threaten its continued ability to deliver to every home and business in the UK. He is this weekend writing to all 659 MPs to ask their help in fighting PostComm’s stance. “Postcomm’s proposals on price controls will cost us pounds 460m in lost revenue. And now another financial roadblock is looming. “We fear Postcomm’s incomplete thinking on the price we are allowed to charge competitors for access to our delivery network will remove another pounds 300m. Our renewal plan cannot survive this,” he says in the letter. “He [the regulator] is likely to take key decisions in a matter of weeks which will have huge implications for the future of the UK’s postal service and the network of Post Office branches. I would therefore urge you to write to PostComm and make your views known.” The letter to MPs is the latest twist in the increasingly bitter battle between the regulator and Royal Mail, which is losing pounds 1.1m every working day. Leighton says that his three-year restructuring plan to return the company to profitability will be “fatally damaged” unless PostComm backs down. In October Postcomm said that, in return for an increase in the price of first and second class stamps next April, it would then impose tight pricing constraints. Leighton says the net result would cost the struggling company pounds 460m, which could force it to default on its debt. The regulator is now negotiating the price of access to Royal Mail’s delivery network, which may cost the company a further pounds 300m. According to one Royal Mail insider: “All this puts the universal service under pressure. Either the business goes bust or we reduce the level of service and that means the universal service is under threat. “What we are talking about is becoming a wholesaler for everyone else’s mail at unacceptable margins. “Leighton is all in favour of using the last mile of the delivery network (to deliver rivals’ post) and getting a share of the revenues. But you cannot do it if you are losing money doing it.” A Postcomm spokesman said the consultation on price controls was continuing and that access charges might not be decided until the new year. “The universal service is enshrined in legislation and we will not allow it to fall over,” said the spokesman. “The bit we regulate – the UK postal service – makes a profit and we need to look hard at how much we ask customers to pay for losses in the rest of the Royal Mail group.”