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Proactive Investors – Royal Mail (LON:) owner International Distribution Services PLC has been dubbed “vulnerable to corporate predators” due to obligations requiring letters be delivered six days a week.
IDS’ third-largest shareholder, Redwheel, urged regulators to scale back the requirements under its universal service obligations following a takeover attempt by Daniel Křetínský.
“Letter volumes have declined from 20 billion at their peak in 2004-5 to 7 billion in the last financial year and are likely to continue to fall,” the group’s co-head, Ian Lance, told the Sunday Times over the weekend.
“The universal service obligation means Royal Mail must maintain a high fixed-cost network without the revenue to sustain it.”
He added this left the delivery service undervalued and “vulnerable” to takeovers as a result.
News broke last week that West Ham co-owner Křetínský had seen his £3.1 billion takeover offer rejected, which was labelled as “opportunistic” by his EP Group.
EP subsequently hinted further offers would be made, with a deadline of May 15 being set under UK takeover rules.
“We would urge that change to the universal service obligation needs to be meaningful, provide long-term relief from the material and unreasonable cost burden and be implemented rapidly,” Lance added.
Royal Mail has long called for reforms to its obligations, which were introduced under legislation in 2011, before the service was privatised between 2013 and 2015.
Regulator Ofcom had stated changes to this were necessary early this year, forecasting at the time that letter volumes would drop to around four billion annually in the next five years.
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