Heseltine eyes the last of the family silver

COMMENT

Somewhere high up in the clouds above Westminster a large blue kite was to be observed yesterday bearing the dreaded words "Post Office privatisation". Surely this can't be back on the agenda barely a year after Michael Heseltine was put in his box by a motley collection of shire Tories, fretful of what flogging off the Royal Mail would mean for rural postal services and appalled at the prospect of the Queen's head being replaced on our stamps by that of the President of the Board of Trade?

Well, just maybe. If Railtrack can be sold to the public, albeit at a giveaway price, then perhaps anything is privatisable. Moreover, the Conservatives are going to need something to spice up their manifesto and dire straits sometimes demand desperate measures.

In any event, the idea of putting the Post Office back in the melting pot for privatisation is not entirely new. John Major hinted at just such a possibility in his Sunday morning chat with Sir David Frost earlier this year.

Mr Heseltine has not got over being outmanoeuvred by his own backbenchers last May - a rare defeat which showed that his legendary political antennae are not always 100 per cent tuned in - and would love to see the Post Office privatised and greater competition introduced into one of the few remaining state-run monopolies. But realistically the chances must be wafer-thin and not just because of the way the parliamentary arithmetic continues to stack up against the Government.

Something odd has also happened to the Post Office since privatisation was abandoned and replaced by a pledge that it would be given more commercial freedom within the public sector.

The Royal Mail - the profitable bit that had been slated for private ownership - has, if anything, been tied more closely to the purse strings of the public sector. Over the next three years its contribution to public finances through its external financing limit will actually be pounds 400m higher than previously planned.

Meanwhile Post Office Counters (the part of the organisation that would have stayed in public ownership even though in reality most of the network is run by private businessmen) has been given greater freedom. You can now do anything from buying travel insurance to wiring cash from your local post office.

No doubt the idea of selling off one of the few remaining pieces of family silver is being aired once again to test backbench reaction. When they have calmed down from their righteous indignation, those 20 or so Tories who spiked Mr Heseltine's guns may care to reflect that another 193 rural post offices have disappeared off the map since then.

If they have any better ideas for getting the Conservative Party out of the electoral hole in which it finds itself, perhaps they would like to pop them into plain manila envelopes and send them off to the Deputy Prime Minister.

Questions to bring BSkyB back to earth

Can BSkyB really be worth nearly pounds 8bn? The quite astonishing growth of the satellite broadcaster in the past few years must be galling to all those who laughed at little Sky Television back in 1989, or who believed that Rupert Murdoch had finally lost his touch. BSkyB is now the country's 25th-largest company by market capitalisation, and is worth several hundreds of millions of pounds more than Mr Murdoch's parent company, News Corporation. Among UK media companies, only Reuters is bigger. Granada Group, even after swallowing Forte, is only worth pounds 6.8bn.

What does the stock market get for its pounds 8bn? A state-of-the-art subscription management system aside, the only real assets are subscriber revenues. It buys most of its programming and leases its satellite capacity. What a wheeze!

So can the company really be worth it? If you ask Sam Chisholm, the chief executive, you'll get the obvious answer: "Of course it's worth pounds 8bn, my dear, and a whole lot more. This is a brilliant company with a brilliant future. Every time we add new channels, we can push up the price. Everybody has to deal with us." (This is the family viewing version; all expletives deleted.)

But is this a party that can last? There are very real regulatory risks ahead for Mr Chisholm and his managers, not least an inquiry by the Office of Fair Trading into the company's dominant position in pay-TV. The OFT might refer the whole industry to the Monopolies & Mergers Commission, and then who knows what the outcome would be? One remedy could be separate accounting of Sky's programming from its subscription management system, to ensure fair arrangements for broadcasters wanting to buy Sky's programming or to use its network.

These issues will be even more pressing as Sky prepares to launch its digital satellite services. The steady, secure supply of fees from viewers for existing services has fuelled the company's incredible growth. Can that rhythm be maintained in the digital age? Will the regulators allow it? The market ignores such questions at its peril.

A takeover tangle in power policy

Poor Ian Lang. The Trade Secretary's officials must have warned him when he blocked the two power generating bids for regional electricity companies that his decision might create more problems than it solved. So it has proved. With PowerGen declared offside, the Americans have nipped in to snap up Midlands Electricity. Southern is more than likely to go the same way.

Mr Lang has already performed so many somersaults on mergers policy for the electricity industry that it is possible he will go one further and stop the Americans bidding too. Certainly such action would be perfectly consistent with last week's "clarification" of chairman Lang's thoughts on who is allowed to take over whom, which was about as clear as mud. His problem is, however, that he has already cleared a number of American bids for other regional electricity companies. A mere trifle perhaps, but even Mr Lang has to show some consistency in approach.

So we are now in the crazy position of it being perfectly all right for Americans to take over regional electricity companies, apparently all right for Scottish generators to do so, fine for Eastern if it is owned by Hanson to take on generating capacity, but wrong for English generators to own distribution companies and wrong for distributors to own generators. Even for those of us who think we understand the Government's plans for the electricity market, this seemingly arbitrary approach is plainly a nonsense.

It is also hard to see how preserving the present rigid divisions of ownership and organisation in the industry, which is essentially what all this decision-making adds up to, is going to benefit either competition or the consumer. The Americans are paying top dollar for these monopolies and they are going to fight tooth and nail to preserve them.

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