Selling the Crown Jewels

SELLING OFF THE CROWN JEWELS

In the Autumn Royal Mail was privatised but is was slightly unclear exactly what elements were in the new company and which elements were not !  It appears that the UK postcode system has been sold off as part of the deal which might explain why the share price was so high.  So a privately owned company now owns the national postcode system. This is really important not just to delivery companies but to any industry requiring address validation. This was never even mentioned in the stock exchange listing and does not appear in any investor material on the Royal Mail site.  I did a double check and the Postal Address File (PAF) is still branded as a Royal Mail asset and competitors still have to pay to use it !!  I dont think there is even any price control !

The new Royal Mail doesn't seem to understand that it is still a very Market Dominant company and that as such it is severely constrained in how it prices products.  I was absolutely amazed to read Royal Mail Wholesale's price increase plans earlier in the year.  These plans have now been halted and investigated  by Ofcom following a complaint by TNT.  The Downstream Access agreement is the cornerstone of the UK governments "market opening" policy which now seems to be in considerable disarray.   Prices should be set by the regulator and not the dominant player in the market.  20% price increases on some products were a key feature of the Royal Mail pricing proposals earlier this year which were complete jargon and largely unintelligible.  I am an expert in postal pricing and this was the most confusing document I had ever seen. I was also very concerned that Royal Mail would price by type of content and that Royal Mail competitors were being required to disclose such sensitive information to their biggest competitor. 

Independent Quality of Service figures are a key performance indicator for a business like Royal Mail and they are directly linked to commercial contracts and prices both in the UK and overseas.  Performance results should first be released to the market through the Stock Exchange market information systems rather than by the company. I have some personal knowledge about this as I set up the Stock Exchanges market information systems during Big Bang deregulation

The highly profitable GLS has been included in the sell-off and this probably contributed significantly to the success of the sell off.  There didn't seem to be any European Commission Competition Commissioner investigation into the sale which has effectively created a pan-European business on the same scale as DHL, TNT or DPD.

So maybe the question that should be asked is did the UK taxpayer get paid enough for this very valuable asset.  Certainly the UK regulator should be taking far more interest in the post-sale Royal Mail Group, how it is operating as a "market dominant" company and whether the inclusion of PAF was a proper decision.  Being a publicly traded company requires a far higher level of openness and transparency than a public company.  

Privatisation was an excellent decision for Royal Mail but is the UK Government and the European Commission up to managing this new "Market Dominant" entity and drive fair and equitable competition into the UK market ?  Lots to do !!

Written by Richard Wishart

#postal