Royal Mail boss criticises Ofcom’s ‘frustratingly slow’ timetable

The chairman of Royal Mail’s parent company has criticised the slow timetable of Ofcom’s consultation on reform of the struggling postal operator’s universal service obligation.

Keith Williams, 68, told International Distribution Services’ shareholders at Wednesday’s annual meeting, that while the loss-making Royal Mail welcomed Ofcom’s plans to consult, the process is “frustratingly slow”, with no decision due until next summer.

“We’ve spent the last four years ping-ponging back between government and Ofcom while [letter] volumes have dropped even further,” he said.

Amid the strain on Royal Mail’s finances from the long-term decline in the letters market and following sustained lobbying, Ofcom said this month that before launching a formal consultation early next year, it would assess loosening the former state operator’s obligations, which includes a requirement to deliver items everywhere in the UK for a uniform price.

The proposals include scrapping second-class deliveries on Saturdays but continuing to deliver within three working days, and retaining a next-day first-class service for six days a week. The reforms are being resisted by the Greeting Card Association and the Communication Workers Union.

At Wednesday’s meeting at Newbury Racecourse in Berkshire, where the board were quizzed by retail shareholders and union members, Williams, a former boss of British Airways, also urged shareholders to back the £3.57 billion, 370p-per-share takeover offer from EP Group, a conglomerate controlled by Daniel Kretinsky, IDS’s largest shareholder.

The bid, which remains subject to government and investor approval, represents a “significant premium” of 72.7 per cent, he said, “balanced against … the need for further significant strategic investments”, and also “reflects the bidder’s view on uncertainty over the nature and timing of USO reform”.

Williams called Royal Mail a “special asset” with a “unique role in society” which is “why we spent as much time on the undertakings to protect Royal Mail going forward as we did on the valuation”.

He called the five-year undertakings from EP Group to the government, including over Royal Mail’s UK headquarters, “in commercial terms, quite a long time… as long as the life of a parliament”.

A spokesman for Ofcom said: “In response to our national debate on reforming the universal postal service, we only recently received a detailed plan from Royal Mail on how that could work in practice. We’re legally required to consult publicly on any proposals, and make sure any changes meet the needs of postal users, which is why we’re carrying out in-depth consumer research.

“People have already told us they’re fed up with Royal Mail’s poor performance, and there are things the company can get on with right now to turn that around.”