Royal Mail's share price has dropped this morning as Ofcom revealed the scope of its wide-ranging review of regulation for the business.
Shares, which had been trading slightly up, suddenly fell off a cliff as the watchdog released its “discussion document” settting out its remit for the review. Royal Mail's share price was down 2.5 per cent at pixel time.
Stakeholders are being asked how much they feel Royal Mail's “pricing and non-pricing behaviour” was affected by rival operators, and how much this varies by type of mail (for example, advertising mail, publishing mail and parcels.”
Ofcom said there had been a number of changes since the regulatory framework was set in 2012, not least the “significant improvement in the financial position of the universal service” and “an intensification in the level of competition and innovation in parcels service”.
“The review will incorporate our existing work to assess Royal Mail’s efficiency, consider its position within the parcels sector, and assess the company’s potential ability to set wholesale prices in a way that might harm competition,” it said.
“In addition, the review will address the implications of Whistl’s withdrawal, which represents a significant change in the potential level of competition for end-to-end letter delivery.”
A spokesman for Royal Mail said it would "continue to participate fully in Ofcom’s review".
"In particular we will be highlighting the need for a consistent approach to regulation, Ofcom’s existing framework, put in place in 2012 was to have provided certainty for seven years.
"Royal Mail believes it has used the commercial freedoms granted by Ofcom in a responsible and appropriate manner to help secure the financial sustainability of the universal service in the face of significant ongoing change across the postal market."
17 July 2015 @ 10:30amRoyal Mail (RMG)