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					       UPU USO Project Group
           12 April 2010


Funding & Sustaining the USO: the UK Experience
                          2



   Growth in letters, compared with
    economic growth, 1984-2009




• Economic growth is no longer a guarantor of increasing
  mail volumes: the two have de-coupled.
                          3



  Indicative stages of the life cycle for
       different mail applications




• Mail as a mode of communication is now in a mature
  phase: volumes are in decline.
                            4




  Operating profit margins of Western European
          postal companies, 2007 (%)




• Operating profits are in decline for European PPOs:
  including Royal Mail !
                           5



External revenues of Royal Mail Group,
       2007-2008 - By division




 • The mails business nevertheless still accounts for the
   largest component of its revenues.
                          6



Segmentation of the letters market (volume)
        by sender and recipient




• And in the mails business, B – C and B – B account for
  most of the volume. If businesses use less mail, the
  market will be severely impacted.
                             7



   Value of the UK postal market, 2006-7
(£11.4 billion) by postal type and application




• Social mail makes only a small contribution to overall
  volumes: but is expensive to collect via letter boxes.
                            8




            Costs v Aspirations
• Postcomm surveys show that people value
  postal services…...but are using them less.

• A universal service remains an important mode of
  communication, and helps social cohesion.

• It also facilitates the fulfillment of internet
  transactions.
                          9




                     Threats



• Electronic communications !........e-mail, SMS,
  mobile phones etc.

• Post is faced with the challenge of differentiating
  itself from – as well as integrating with – other
  modes of communication.
                         10




            The Hooper Report
• Was commissioned in 2008 by the UK
  Government to examine impact of FMO on Royal
  Mail.

• Hooper concluded that “the universal service
  cannot be sustained under present policies.”

• He went on to say that “ a radical reform of Royal
  Mail’s network is inevitable”.
                        11




        Hooper’s Key Message

• “Sustaining the universal service depends
  funadamentally on……..

• MODERNISING ROYAL MAIL”

• He didn’t talk about compensation funds or state
  aids.
                        12




             The Post Offices
• Royal Mail’s mail business is kept separate from
  its network of Post Office counters.

• Given its “wider social role”, he recommended
  that the Post Office should remain wholly under
  Government control.

• This is because Post Offices are not expected to
  operate on a commercial basis.
                         13




    The Main Recommendations

• Royal Mail needs a ‘strategic partner’.

• Government should take responsibility for its
  pension liabilities.

• Responsibility for postal regulation should be
  vested in a ‘communications’ regulator (OFCOM).
             14




Government’s Response


     • We agreed !!
                         15




                  The Result

• No strategic partner was found….

• The banking crisis further reduced mail
  volumes……

• The Postal Services Bill was not put before (this)
  Parliament…..
                         16




     So Where Are We Now ??
• Still looking to implement Hooper’s key
  recommendations (when the economic and
  political climate is right).

• Supporting Royal Mail’s programme of
  modernisation and cost reduction.

• But we are not seeking to ‘de-scope’ the USO
  per se–in terms e.g.of 6 daily deliveries per week.
                      17




               Thank You

           • Questions welcome……

• With any hard ones for Royal Mail colleagues…

				
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