Postal watchdog angers Royal Mail boss with split suggestion

Britain's postal watchdog is pressing for the carve-up of Royal Mail to encourage fresh competition into the market.

Under Postwatch's proposals, Royal Mail would be divided into two companies, with separate chief executives. The consumer watchdog has taken its cue from the gas industry, which has seen the creation of separate businesses owning pipes and billing customers.

Under its plans for Royal Mail, Postwatch would like to see the state-owned company's marketing operations split from the pipeline business, which includes sorting and delivery. It argues that splitting Royal Mail in two would ensure that the fee rivals pay Royal Mail to access its sorting and delivery services would exclude marketing costs.

"This is not an anti-Royal Mail move, it is pro-competition," a Postwatch spokesman said. "We have got to get transparency at Royal Mail, to know that there is no cross-subsidy between the businesses."

Postwatch believes that the carve-up of Royal Mail could be done either by splitting it into two separate business or creating two companies under the Royal Mail umbrella, similar to the retail and wholesale operations within British Telecom.

Postcomm recently raised the idea with the Department of Trade and Industry, the sole shareholder in Royal Mail. Postwatch has also written to the postal regulator, Postcomm.

A Postcomm spokesman said: "The idea was raised as a way of ensuring that Royal Mail does not get up to any anti-competitive practices. We have not formed a view yet."

A Department of Trade and Industry spokesman said: "Postcomm is free to express its views on Royal Mail's operations. We'll consider Postcomm's conclusions when they are published."

The watchdog's proposals are set to increase tensions between the Royal Mail chairman, Allan Leighton, and the Postwatch chairman, Peter Carr.

Mr Leighton is concerned at the rising expenditure at Postwatch, of which £10m a year is funded by Royal Mail. In the run-up to Christmas the pair clashed over Postwatch's comments on the reliability of Royal Mail's 1st-class service.

A Royal Mail spokesman dismissed Postwatch's proposals.