Royal Mail sale - what will it mean for mail users?

On Wednesday 10 July the rumours were finally confirmed when the Business Secretary Vince Cable outlined the Government plans for an Initial Public Offering (IPO) later this year of 90% of Royal Mail, with the remaining 10% going to employees. The Communication Workers Union is violently opposed to any change in ownership (even though their members will each receive an estimated £2,000 in shares) claiming that this will mean an end to the six days a week postal service, a worse service and higher prices.

So how will a privately owned Royal Mail differ from the publicly owned “national institution” that we’ve been used to for over 350 years?

No real change for mail users in the short term
Most mail users won’t notice much difference to begin with. We won’t see lots of services cut or huge price increases. A lot of what Royal Mail does, such as its obligation to deliver to every home six days a week, is governed by both UK and EU legislation, and it will need the approval of Parliament to make any significant change. It will also still be subject to regulation and the regime that Ofcom introduced when it took over as the postal regulator is designed specifically to provide stability and last for seven years. This also means that Royal Mail will also have to continue to offer Downstream Access under reasonable terms so that competitors can continue to operate in the market.

Long-term benefits for mail users
A privatised Royal Mail could offer a number of benefits to mail users in terms of innovation, price stability and customer focus in the long term. The postal market is changing rapidly – for instance fewer letters but more packets – and Royal Mail needs to invest in changes to its network and operations to adapt. If it is successful this will result in a wide range of new product and service opportunities and more price stability since costs won’t be so dependent on letter volumes. The disciplines of a publicly quoted company – the need to satisfy investors – will also mean that there will have to be more focus on customers with improvements in service, quality and communications and that has to be good news for all users.

Alex Walsh, Consultant, DMA