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The billionaire behind the Royal Mail bid, Daniel Kretinsky, has vowed to keep the national postal service operating six days a week, a move that is difficult for Labour to brush aside, according to analysts.
Kretinsky, known by many as the Czech Sphinx, has pledged to maintain the current Universal Service Obligation (USO) if the government approves his EP Group’s takeover of the British institution.
The USO governs the way Royal Mail has to operate, and the group has been seeking to reform the regulation.
When asked if he would walk away from the USO, Kretinsky told the BBC, “As long as I’m alive, I completely exclude this”.
However, the offer document stated that the bidder supports Royal Mail’s attempts to reform the USO.
Earlier this year, Royal Mail put forward proposed reforms to the USO. These included proposing new, additional reliability targets for First Class and Second Class letters and changing the delivery speed for standard bulk business mail so letters arrive within three days, not two.
Most notably, the proposal suggested changing the delivery speed of all non-first-class letter deliveries. All non-first-class post would be delivered every other day under the reforms.
The proposed reforms have received a mixed reception.
Martin Walsh, deputy general secretary of the Communication Workers Union, recently argued the USO, as a six-day option is, “no longer financially viable,” and joined other union members in seeming to support the change.
Ofcom, which is responsible for regulating the company, has yet to respond.
Challenges ahead for Royal Mail
The commitment from Kretinsky could make it easier for Labour to wave through the deal, especially if the new government wants to prove its pro-business credentials.
“Labour does not want to nationalise Royal Mail and Kretinsky is making it as easy as possible for them and Ofcom to give their consent,” Peel Hunt analyst Alexander Paterson told City A.M.
“However, that does not mean either will roll over and simply agree. I’m sure, given the highly politicised nature of Royal Mail, Labour (and Ofcom) will want to make it look like they are investigating thoroughly,” he added.
Kretinsky’s £3.6bn offer, which the Royal Mail board accepted in May, valued it at £5bn, including assumed debts.
Shareholders are expected to give the green light on 25 September, but the government can also block the deal.
The Labour party has promised to “robustly scrutinise” the first foreign takeover of the 500-year-old British institution.
Kretinsky has pledged to maintain Saturday first-class deliveries, preserve the Royal Mail brand, and keep the headquarters and tax base in the UK to sweeten the deal for Labour.
He’s even dangled a profit-sharing scheme to entice union bosses.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, told City A.M.: “Getting union leaders onside should bolster political support, and this pledge to keep the six-day service may go some way in appeasing their concerns, as it would help allay fears of further job losses among postmen and women.
As other demands like staff ownership look unlikely, she added: “Another way of giving staff ‘a stake in the business’ as demanded by unions would be in the form of a greater governance role for worker representatives.
“In the Czech Republic, employees have a third of the seats on supervisory boards of largely privately owned companies, following a change in the law in 2017. Given his experience owning a raft of Czech companies, it’s likely Mr Kretinsky would be at ease with greater employee representation,” Streeter explained.
The news follows speculation that Kretinsky’s EP Group has worked up plans to make an £800m investment into Royal Mail as part of the billionaire’s aims to dominate the UK’s parcel market. The investment would help the company slash delivery prices and dethrone major rival Amazon by introducing 20,000 parcel lockers.
