25th May 2016 11:40
LONDON (Alliance News) - Royal Mail PLC shares were given a boost on Wednesday after UK media and communications regulator Ofcom said it has not proposed any price controls as part of its regulatory review of the postal operator.
Royal Mail shares were up 0.9% on Wednesday to 525.50 pence.
Concerns had been raised that Ofcom would impose a series of new measures on Royal Mail, which continues to work on cutting costs amid a very competitive parcel delivery environment and a secular decline in letter deliveries.
In July 2015, Ofcom issued a statement of objections to Royal Mail with the provisional view that the company had breached competition law by discriminating in its wholesale pricing against postal operators that competed with it on delivery.
Earlier the same month, Ofcom published the scope of its review of the regulatory framework for the postal service operator, which confirmed that new price controls were still on the table.
On Wednesday, however, Ofcom said has not proposed any new price controls on Royal Mail's wholesale or retail products, removing a key concern for investors.
Ofcom did, though, outlined proposals covering the "access" market, in which rival operators collect and sort mail before handing it to Royal Mail to complete delivery. It also addressed the handling of untracked letters.
Ofcom said it proposed tightening rules on the access market, first by stopping shorter notice periods around contractual terms imposed by Royal Mail on access operators, and second by ordering Royal Mail to respond within two weeks when a wholesale customer requests a product similar to one already sold by Royal Mail.
Ofcom also said it was concerned Royal Mail may be able to "cross subsidise" its parcels business through its letters business in a way that would disadvantage other parcels operators. It will monitor this closely in the future, the UK regulator said.
In addition to this, the watchdog said it has proposed new rules which will require postal operators in the UK to ensure untracked letters arrive safely.
All operators who deliver these letters, including medical letters, bank statements and birthday cards, will have to minimise the risk of loss, theft or damage under the proposals.
Ofcom is planning to introduce new rules to clarify how postal operators must look after these items, with a shift in emphasis in the regulation away from logistical and procedural requirements towards assessing the actual performance of postal operators.
Those failing to meet the new standards would face fines, Ofcom said.
Ofcom said the consultation on the review will close on August 3, and it expects to publish a statement on its final decisions later in 2016.
Royal Mail noted the publication of the Ofcom statement Wednesday and said it will review the outcome before providing a more detailed response.
By Sam Unsted; [email protected]; @SamUAtAlliance
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