Royal Mail partner denies competition claim

The Royal Mail’s claim that it is suffering from the introduction of competition has been undermined by Pitney Bowes, one of the mail operator’s main commercial partners.

Pitney Bowes, the company that invented the franking machine and handles 20 per cent of UK mail sent each day, says Royal Mail’s position is unlikely to be affected by competition.

It said the operator was unlikely to lose much market share to rivals in the next three years and might even benefit from the introduction of competition in mail markets. The comments undermine complaints by Allan Leighton, chairman of Royal Mail, that the postal regulator has jeopardised Royal Mail’s three-year restructuring plan by introducing too much competition too fast.

Royal Mail is in the second year of the plan that aims to cut £1.4bn of costs to make the business profitable. Patrick Keddy, president of Pitney Bowes’ global mailing systems Europe, said: “Deregulation has had little practical effect on the volume of mail handled by rivals.”

He added that the UK market was expanding, mostly driven by the growth in advertising mail, and that deregulation could help increase the size of the market. This would mean more business for Royal Mail and its rivals, he said.

Pitney Bowes, a US company, franks £2.5m worth of business post a day and pays Royal Mail for the privilege.

Mr Keddy, who has managed Pitney Bowes’ partnerships with mail operators in Europe, added that even where competition had been introduced ahead of the UK – in Sweden, the Netherlands and Germany – ex-monopolies such as Deutsche Post, in Germany, and TPG, in the Netherlands, still held more than 90 per cent of the mail market.

Deregulation came into force in January with the European Postal Services Act, which reserved postal items of less than 100g for national mail operators.

In 2006 that limit will be reduced to 50g and will disappear altogether in 2009.

However, Postcomm, the regulator, has introduced licences, mainly for bulk mail, that allow rival operators to compete with Royal Mail within that restricted area of items weighing less than 100g.

Mr Leighton has complained that the licences allow competitors to “cherry pick”, undermining the Royal Mail service.

Mr Keddy agreed that deregulation had been introduced faster in the UK than in many other European countries.

“TPG and Deutsche Post can operate in the UK’s reserved area but the reverse is not true at present,” he said. But he said the impact on Royal Mail’s business would be minimal.

Royal Mail last month challenged proposals from Postcomm to allow competitors to use its distribution network for as little as 14p per item, saying it would not allow it to make a profit.