Royal Mail 'minded to accept' Postcomm's price control

LONDON – Royal Mail has said it is 'minded to accept' the 2006-2010 price control proposals from Postcomm and expects to inform customers next week of pricing changes in early April.

Its acceptance depends on it reaching agreement with Postcomm on the formal amendment to its licence, according to a statement issued by the company. A Postcomm spokesman was unavailable to provide a reaction at the time of publication.

If it accepts, the agreement is subject to 28 days' statutory consultation before the changes can be incorporated into Royal Mail's licence and take legal effect. The changes can be backdated to April 3 once the 28 days are over.

On Tuesday, Postcomm published the revised terms of the price control after industry consultation. The changes affect magazine delivery services, the front loading of price increases, and allows the postal operator to effect price increases should its pensions deficit climb.

Postcomm said the changes are limited and still mean that the price of a First and Second Class stamp can go up by no more than 2p this year.

However, by 2010 the First Class stamp price could be allowed to rise to 37p, rather than 36p as previously proposed by the regulator.

This concession, which allows Royal Mail to make extra revenues of 0.8% a year from April 2007 onwards, would take effect should the company's pension deficit increase above £5.9bn. The deficit is to be recalculated in the next few weeks -- the last estimate in March 2005 was £4.6bn.

Although this favours Royal Mail, Postcomm also helped out customers by reducing the "front-loading" of the revenue increase it will allow Royal Mail.

In the year from April 2006 this increase is now 4% rather than 6.2%.

Royal Mail could yet reject the terms and thus trigger a referral to the Competition Commission.

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