Financial News

  • 21 June 2014, 11:54

TNT Plan 'Cuts 200m From Royal Mail Revenue'

Royal Mail has warned that delivery plans by rival TNT could reduce its revenue by 200m in coming years.

It said TNT Post UK's expansion strategy would cost it 200m in the 2017/18 financial year.

It told regulator Ofcom that "absent intervention" would risk damaging its ability to reach a pre-tax profit margin of 5% to 10%.

Direct deliveries from rivals undermine the universal service because of "cherry picking", according to the Royal Mail, because they are not bound by similar stringent requirements.

In the formal submission to Ofcom, Royal Mail requested an immediate review of direct delivery in Britain.

It also asked the watchdog to impose any necessary regulatory changes to safeguard the universal service to households and businesses.

The submission to the regulator follows on from previous statements made by Royal Mail.

It says it is already trying to manage an annual decline in letter volumes of around 5%.

TNT has grown local market share of 14% in areas of operation and plans to cover 42% of UK addresses by 2017, the submission said.

The iconic red delivery service was privatised last autumn and the Government maintains a 30% stake.

An Ofcom spokesperson said: "We will consider the report Royal Mail has given us carefully.

"Protecting the universal service is at the heart of Ofcom's work, and 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."

In response, Communication Workers Union deputy general secretary Dave Ward said: "Ofcom's primary duty is to protect the universal service which allows us to send a letter to Belfast, Bristol or Brighton all for the same price.

"If Ofcom does not carry out an immediate review of the impact of direct delivery on universal service, it will have failed in its duty."

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