Royal Mail share price slides as Ofcom launches "fundamental" review of Royal Mail

Emma Haslett
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The departure of Whistl from the direct delivery market means Royal Mail is now without competition in the sector (Source: Getty)

Communications regulator Ofcom today announced plans for a "fundamental" review into Royal Mail's direct delivery service, sparked by the withdrawal of Whistl, Royal Mail's only rival in the sector.

Read more: Opinion - Lessons learned as final Royal Mail parcel goes on sale

Shares were down 2.5 per cent at 492p as Ofcom said the investigation will build on work already being done to assess the newly-privatised company's efficiency, its performance in the parcels market, and its "potential ability to set wholesale prices in a way that might harm direct competition".

"In addition, the review will address the implications of Whistl's withdrawal, which represents a significant change in the direct delivery market," said the regulator.

Although Royal Mail has plenty of competition from the likes of TNT, DHL and even Amazon itself in the parcels market, in the letters market it is relatively alone. In 2012, in advance of Royal Mail's IPO in 2013, Ofcom established a regulator framework which cemented the importance of the universal service.

However, today Ofcom said that after Whistl's departure from the direct delivery market, Royal Mail had been left "without any national competition for direct delivery of letters.

(Source: Ofcom)

"Royal Mail itself is in a stronger position financially than when Ofcom last reviewed the postal framework," it said.

Earlier this month Royal Mail's share price dipped after the government sold off half its remaining stake in the company, raising £750m.

But things haven't been easy for the service since it was privatised in 2013. Not only has its IPO been subject to strong criticism, but Royal Mail's chief executive, Moya Greene, has bemoaned the level of competition in the parcels market, on which it is increasingly dependent.

Shares fell 7.3 per cent in November when Greene said Amazon's entry into the market could be a serious threat.

"The growth rate here has been halved in the wake of stiff competition from the likes of TNT, DHL and now Amazon," Greene complained.

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