Royal Mail warns of competition threat

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RoyalMailRed

Reuters.

London - Britain's Royal Mail has submitted a report to regulator Ofcom over the threat to the country's postal service it said was posed by competitor TNT Post.

Royal Mail, formerly state-owned before it was privatised last year, is required by law to deliver letters six days a week to the whole of the country under its so-called universal service obligation.

However, it warns its financial ability to sustain this service could be threatened if rivals are able to “cherry-pick” where to provide competing services - targeting only the most profitable parts of the market and ignoring the rest.

TNT Post has launched in some areas of London, Manchester and Liverpool.

Royal Mail said a lack of intervention from Ofcom would undermine its ability to reach a 5-10 percent operating profit margin for its business for the future.

The firm, which estimated TNT Post's plans would reduce its revenue by over 200 million in 2017-18, said it had asked the regulator for an immediate review to determine the regulatory changes needed to safeguard its service.

Ofcom, which is expected to conduct a review of the impact of competition on the universal service by the end of 2015, said it would consider the report submitted by Royal Mail carefully.

“Our current evidence clearly shows that the service is not currently under threat. We would assess any emerging threat to the service quickly, in the interests of postal users,” a spokeswoman said.

TNT Post said there was no evidence that postal delivery competition posed a threat to the universal service obligation.

“Competition is the best news in years for the postal sector - we are creating jobs for thousands of people,” it said.

“TNT Post delivers less than 1 percent of the mail in the UK,” it added.

Shares in Royal Mail were down 0.4 percent at 481 pence at 13:26 SA time. - Reuters


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