The future of the Royal Mail is not just a matter for the current owners, says ALEX BRUMMER

As keepers of the flame of free market capitalism, one can understand Government’s reluctance to become involved in takeovers.

The notion that the £3.5billion offer by Czech sphinx Daniel Kretinsky ‘is ultimately a matter for the current owners’ is away with the birds.

One only has to look at the disastrous record of privatised utilities that have fallen into overseas or private equity hands to know that handing the keys of the Royal Mail’s domestic and European fleet to a mysterious Czech billionaire can only lead to pain for stakeholders.

It is easy for any bidder to promise to abide by the regulatory rules such as the Universal Service Obligation (USO).

Enforcing them once ownership has shifted overseas is a different matter.

Government also needs to recognise that stakeholders, the workforce, customers, Whitehall, the security services and many others have a keen interest in what happens to the Royal Mail.

Its flaccid response was a sharp reminder of events a decade ago when America’s Pfizer bid for AstraZeneca.

The immediate response of Chancellor George Osborne and others was ‘bring it on’. If that had happened, Astra’s progress to become the most valued company in the FTSE 100 would have been stymied.

There is so much about the Kretinsky approach that we don’t know. Where does his wealth originate?

Is this going to be a deal paid for with structured debt and what will it mean for future investment in the postal service?

Will Kretinsky want his image on stamps and post boxes?

Financing is critical. One only has to look at Thames Water to recognise that the goal of greedy overseas owners is to extract cash while the going is good and head for the hills when it all goes wrong. 

The departure of Michael McNicholas, of Canadian pension fund Omers, from the board symbolises the cut-and-run effect.

Royal Mail will have to pass several regulatory barriers. If the National Security and Investment Act, passed under Tory rule, were doing its stuff, the deal would be blocked at the first hurdle.

At the time of privatisation, the Government effectively took on responsibility for a pension fund which swings wildly between deficit and surplus. 

Whether taxpayers should be obliged to take on this risk should control pass to an foreign owner would need to be clarified.

Ofcom’s plan for the USO, which includes a more pricey but reliable first class service, needs to be rapidly implemented.

The Kretinsky deal must be blocked on public interest grounds. Free marketeers must understand that there are boundaries which should never be crossed.

Ringing changes

The Post Office’s former relation BT, spun off in 1981, also has a billionaire on its share register.

The French-Israeli telecoms tycoon Patrick Drahi increased his stake to 24.5 per cent a year ago and there has been endless speculation that, together with another big shareholder Deutsche Telecom, it too could be a bid target.

BT is moving to restore shareholder confidence after a bout of short-selling. Boss Allison Kirkby is making big decisions.

She is pulling back from global services at a cost of £488million but will concentrate on UK enterprise and growing income from security. 

More efficient roll-out of broadband should lower the cost of the pledge to provide full fibre broadband to 25m households by 2026.

A cash flow promise of £1.5billion in 2025 against £1.3billion has been put in place and the dividend lifted. Kirkby and chairman Adam Crozier have more than a passing interest in how the assault on Royal Mail works out.

Royal flush

Just as Royal Mail is threatened, the National Portrait Gallery fights back with an exhibition of pictures of members of the Royal Family from the last hundred years.

The exhibit includes the ‘diamond dust’ Andy Warhol tribute to Queen Elizabeth II and the 40th birthday portrait of the Princess of Wales.

The message: don’t dare touch the King’s best profile on our postage stamps.