Tag: Royal Mail

Strike worth GBP 10m to Royal Mail rival

Posted by | Jun 29, 2007 | |

One of the private delivery firms competing with the Royal Mail predicted tonight that it already stood to make at least GBP 10m out of the postal service’s 24-hour strike which gets under way in the morning.

James Greenbury, the chief executive of DX, which is backed by private equity group Candover Partners, said the delivery group had attracted an “extraordinary” level of demand from new customers – more in the past week than for the whole of last year.

The comments highlighted the threat to the state-owned postal service from the low-cost and aggressive private delivery firms. Groups such as DX, Global Mail and Dutch-based TNT are coming into the market at a time when overall mail volumes are falling because of email and other electronic media.

Since private operators were given access to the UK postal market, Royal Mail says it has lost 40% of its business customers, including the Department for Work and Pensions, BT and last week online retailer Amazon.

One of the biggest gainers has been Dutch-based TNT, which claims to be distributing more than 1bn items of mail a year in Britain and made profits worldwide of GBP 240m last year. The company has been conducting trials of door-to-door deliveries in Glasgow and Manchester before it starts a full service in all major British cities. TNT, Global Mail, which is backed by Deutsche Post, and others have licenses to collect and sort mail but must hand it over to Royal Mail for the “final mile” delivery to the door.

DX offers next day home delivery for GBP 3.50 and is a direct competitor to Royal Mail’s own special delivery, which costs GBP 4.30. DX has built up an annual turnover of GBP 160m and had set a target to make an extra GBP 10m this year. It says it will easily achieve this because of the strike.

Only around 20,000 of the 150,000 Royal Mail staff are not members of the union. Postcomm, the industry regulator, declined to comment on the conflict.

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Pricing in Proportion and Packetpost Returns

Posted by | Jun 27, 2007 | |

In February 2007, Royal Mail made an application to extend Pricing in Proportion (PiP) to Packetpost Returns.

Packetpost Returns is a service that allows packets to be returned from customers with the postage cost being borne by the original sender.

Royal Mail’s application proposed moving away from the system under which the price per item paid by the original sender is based on the average weight of the mail returned. Instead, Royal Mail proposed that an item returned through this service should be treated and charged as a packet under its PiP framework.

Royal Mail has also requested that Packetpost Returns, consistent with the greater alignment of these prices to those of normal Packetpost, should be included in the same controlled services group as Packetpost.

Postcomm conducted a consultation exercise focused on users of Packetpost Returns and other interested parties and carefully considered the points made in the responses. Following the consultation, the Commission decided to:

– allow Royal Mail to introduce a PiP price structure for Packetpost returns;
– require Royal Mail to give at least 3 months notice of the price changes following this decision;
– and reject the application to include the product in the same controlled services group as Packetpost.

Royal Mail has not yet made it clear when it will implement the new price structure for Packetpost Returns.

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Postcomm agree to Royal Mail request

Posted by | Jun 26, 2007 | |

Postcomm has agreed to Royal Mail’s request to suspend until the end of its current financial year the payment of compensation to bulk mail customers, and to ensure that the company is not subject to a downward adjustment to its allowed revenues (known as the ‘C factor’), where industrial action has taken place and quality of service figures have dropped.

The reason for this decision is that Postcomm wishes to ensure that – against a background of Royal Mail’s current financial position, including its substantial pension deficit – the possibility of having to pay compensation and/or earning reduced revenue next year does not discourage the company from taking the steps needed to modernise its business, which will be to the benefit of all mail users.

Postcomm’s agreement to these suspensions is subject to some important safeguards for customers:

-A final decision on the amount of any relief will not be made until after the end of this financial year (31 March 2008) when Royal Mail’s final quality of service figures will be known. In making its decision at that point, Postcomm will expect Royal Mail to be able to demonstrate that the industrial action (a)arose as a result of carrying out its transformation plans and not for some other reason, and (b) had a direct causal link to quality of service failures.

-After the end of the financial year, Postcomm will convene an open meeting at which Royal Mail will present the main points in its application. Participants will be able to ask for further explanation of the justification for agreement by Postcomm to Royal Mail’s request.

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UK regulator must balance competition and obligation

Posted by | Jun 26, 2007 | |

Postcomm, the regulator created in 2000 to oversee the postal market’s opening up to competition, has two tasks to balance.

The first is to develop a competitive market and ensure that Royal Mail, the former monopoly, does not stifle rivals. The second is to preserve the universal service obligation, allowing anyone in the UK to post letters and parcels to any other part of the country at the same affordable rates.

So far, it has managed to meet both these targets.

Postcomm’s strategy re-view, set up last summer, is examining policy options and is expected to publish its preliminary thoughts within a few weeks.

These will include whether it should require the separation of Royal Mail’s retail arm, which collects and sorts post, from the wholesale operation that delivers the mail for it and other postal operators.

It is also asking whether changes are needed to the universal service obligation, which covers more than half the post – including much of the bulk mail sent by business users.

This guarantees daily delivery of mail for every UK household and business, six days a week, and one collection per day, every day except Sunday.

Royal Mail has already requested a change in its licence in order to limit the obligation to stamped mail, which is about 10 per cent of the total, saying the present rules hinder its ability to compete with private sector operators.

Sarah Chambers, Postcomm’s chief executive, appeared sympathetic to the request in her address to Institute of Economic Affairs conference on the future of the postal services.

The strategic review is considering reducing the number of products covered by the obligation as growing competition begins to increase the choices available to users.

She said Postcomm was exploring reducing the obligation to deliver to the front door six days a week. Such changes would require amendments to the Postal Services Act, which opened the mail to competition.

The European Union directive on postal services specifies that countries should maintain a universal service every working day, but other European countries have limited their coverage to Monday-to-Friday.

Ms Chambers told the conference that lifting the requirement to deliver on Saturday would not stop weekend deliveries, while retaining it could fetter the development of better services – including, possibly, Sunday deliveries by some mail companies.

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