21st Feb 2014 16:47
LONDON (Alliance News) - Royal Mail PLC Friday said that regulator Ofcom had opened an investigation after rival TNT Post UK complained about changes to the contracts that Royal Mail imposes on rivals and big businesses for using its delivery services.
In January, Royal Mail had said it would raise its so-called Access prices on March 31 by between the Retail Price Index plus 0.3% and RPI plus 1.0%. It also changed some of the terms of the contracts, saying it would alter the price differential it charges for delivery between London, urban areas, suburban areas and rural areas to better reflect "relevant costs and market conditions". It will also give a discount to Access customers who guarantee volumes for up to two years.
Royal Mail has a requirement to maintain postal delivery services across the UK. Rivals in the deregulated market, like TNT, can't build a full-scale distribution network because the cost would be prohibitive, and so Royal Mail charges them to deliver the mail, which is delivered partially sorted to Royal Mail centres.
In a statement, the company said the planned Access contract price increases weren't impacted by the TNT complaint, and will go ahead as planned.
However, Royal Mail has suspended its plan to offer a 0.25 pence per item discount if the customer provides monthly volume forecasts for up to two years ahead. It thinks the discount reflects the cost savings it could make by being better able to plan to cope with volumes it knows about at a local level.
It has also suspended its plan to change the zonal price differences for delivering in London, urban, suburban and rural areas.
"Royal Mail believes TNT Post UK's complaint is unfounded. Royal Mail will cooperate fully with Ofcom and will share with it the comprehensive and robust rationale for our proposals," it said in a statement.
"We considered carefully our legal and regulatory obligations before notifying Access customers of the changes. We believe that the changes are fair, reasonable and proportionate. They are an important part of Royal Mail's commercial response to both changing market conditions and to Ofcom's comments in its March 2013 guidance document on end-to-end competition in the postal sector," it added.
"In that guidance document, Ofcom noted Royal Mail could use its commercial freedom to amend the pricing and terms of Access contracts, to ensure they are reflective of relevant market costs. We wish to see this matter resolved as quickly as possible so that these planned changes can be put into effect to help secure the sustainability of the Universal Service," it said.
Royal Mail shares closed down 1.5% at 599.70 pence Friday.
By Steve McGrath; [email protected]; @stevemcgrath1
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