According to reports, second class mail will be reduced to just three days a week when billionaire Daniel Kretinsky completes his £3.5 billion takeover of Royal Mail.
The businessman, nicknamed the ‘Czech Sphinx’ because of his inscrutable nature, plans to take Britain’s 500-year-old postal service fully into foreign hands for the first time.
But the business magnate, who also owns a 10 per cent stake in Sainsbury’s and almost a third of West Ham football club, could already see plans to cut Royal Mail’s current service.
Currently, Royal Mail’s universal service obligation requires it to deliver first and second class mail to every address in Britain six days a week.
But Kretinsky, 48, would only want to keep the six-day service for first-class mail – which would attract a higher premium, according to The Sunday Times.
It is thought that moving second-class letter deliveries to every other day would save the company £300 million a year.
But the change would have to be signed off by the watchdog Ofcom.
Mr Kretinsky’s EP Group has offered Royal Mail’s parent company International Distributions Services (IDS) Ltd 370 cents per share, up from 320 cents per share last month.
But Kretinsky’s offer comes at a time of extreme pressure for the Royal Mail, which is facing backlash over suggestions it could deliver non-first-class letters every other day to save money.
Under the proposal, 1,000 positions would also be eliminated through voluntary redundancy.
It’s a drop from an earlier suggestion to scrap Saturday deliveries altogether, which was roundly criticized by both government and opposition MPs.
IDS ‘intends’ to accept the deal – as long as EP Group agrees to a series of demands that would protect Royal Mail’s 500-year-old British heritage, such as keeping its headquarters and taxation in Britain.
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EP Group also says it will protect workers’ rights and continue to recognize the unions representing both Royal Mail and GLS staff.
The 508-year-old postal company was privatized in 2013, but has struggled financially and seen its share price fall.
The annual results of IDS – which also owns a profitable European parcel company – are expected to expose Royal Mail’s poor performance next week, with the company losing almost £1 million a day.
Vince Cable – the Liberal Democrat politician who led the privatization – this week defended his actions, accusing the government at the time of selling the company on the cheap.
He said recent stock performance justified the decision to sell at the price. Kretinsky’s offer is just 40p more than the 2013 share price of 330p.
‘It is a company with very deep problems due to the decline of its core activities [letters]Mr Cable told the Mail.
Kretinsky has amassed his £7.3 billion fortune in a number of industries, but has made much of it by buying up unwanted coal, gas and other fossil fuels in a bet against the green transition.
The businessman has until May 29 to formalize his takeover of IDS.
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The Postal Service says the peak of 20 billion letters sent in 2004/2005 has fallen to seven billion last year and is expected to fall further, despite the number of addresses in Britain increasing by four million over the same period. has grown.
As a result, postmen are delivering fewer letters to more addresses – an unsustainable model in its current form, the Royal Mail says.
It claims the cost of meeting its universal service obligation – the legal obligation to deliver mail six days a week – is as much as £2 million a day.
Royal Mail’s perilous financial situation has not been helped by employees walking out several times between May 2022 and July 2023 amid rows over proposed pay rises at the height of the cost of living crisis.
Postal workers’ wages were frozen in 2021 and offered a two per cent increase plus a one-off payment of £250 – which the CWU union refused amid inflation of around nine per cent.
It led to the now infamous images of cage after cage of undelivered mail sitting outside postal depots across the country – and eventually Royal Mail convinced unions to back a 10 percent pay rise and a £500 lump sum.
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Still, the agency has since cut about 10,000 jobs, including 6,000 layoffs and thousands of other workers who were not replaced when they left.
Amid these rising costs and competition from other couriers such as DPD, Yodel, Evri and Whistl eating away at its customer base, Royal Mail reported a loss of £1.044 billion in the year to March 2023.
Last year’s results are due to be published any day now, but the half-year results to September show an operating loss of £383 million, compared to £278 million last year.
That does not include the period when Royal Mail was fined £5.6m by Ofcom for failing to meet delivery targets.
Only IDS’s international shipping arm, Amsterdam-based GLS, is profitable and helps offset the British company’s problems.
Kretinsky already owns part of a European postal service, the Dutch PostNL, prompting speculation that he could try to merge the two.
He also already has interests in several British companies – and is said to be something of an Anglophile with a keen interest in Britain and its history.
Most of Kretinsky’s wealth comes from his control of energy giant EPH, which has power stations in Devon, Lincolnshire, North Yorkshire and Northumberland.
A sports enthusiast, he has been chairman of his boyhood club, 37-time Czech champions Sparta Prague, since 2004 and owns 27 percent of West Ham.
He has a stake in the French edition of Elle and previously owned part of Le Monde. The billionaire has also explored a bid for the Telegraaf.
He and his girlfriend Anna Kellnerova, heiress and champion show jumper, are one of the richest couples in the world.
At 27, she is one of four children of Petr Kellner, who was the richest man in the Czech Republic until he died in a helicopter crash in Alaska in 2021 at the age of 56.
But it remains to be seen whether Kretinsky is a friend or an enemy – at a time when Royal Mail’s reputation is in the gutter.
According to YouGov, less than half of the British public have a positive impression of Britain’s main postal delivery service.
Last year, former Ocado boss Simon Thompson quit as boss, leaving the company in the hunt for its fourth leader in four years.
And its declining reputation will not be offset by the rising costs of posting letters and parcels over the network, which have risen exponentially since privatization.
Last month the price of a first class stamp was increased to £1.35 and that of a second class stamp to 85p. Two years ago they cost 85p and 66p respectively.
In 2015, Kretinsky bought the 15-bedroom Heath Hall in Hampstead for £65 million, and once rented it to Justin Bieber for £27,000 a week during a UK tour.
The British government said it was “monitoring these developments closely” and that it would “engage with the bidder at an appropriate time to explain our expectations for the future of Royal Mail.”
“Our priority is to ensure Royal Mail customers get the service they deserve… regardless of owner,” the company said on Wednesday.
But Chancellor Jeremy Hunt is wary of any foreign takeovers of British institutions after the Thames Water crisis, which could still be nationalized because investors refuse to pump extra money into the provider.
Thames, which has £18 billion in debt, could be put into state ownership if it cannot find short-term cash – but it wants permission to increase its bills by 40 percent, pay lower fines and still pay dividends to shareholders may pay out.