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Monday, September 16, 2013

Britain launches postal service privatization

LONDON: Britain's government on Thursday officially launched plans to privatize more than half of Royal Mail, saying an initial sale of shares in the state-run postal service would occur within weeks.

"Her Majesty's Government today announces its intention to proceed with an initial public offering of Royal Mail," said a joint statement, which added that the IPO was "expected to take place in the coming weeks".

Royal Mail is to list on the London Stock Exchange, while the coalition government said it would "retain flexibility around the size of the stake to be sold".

The government had in July announced plans to privatize more than 50 percent of Royal Mail following a major restructuring of the organization in recent years, triggered by fierce competition from email.

Royal Mail was expected to be Britain's biggest privatization since the 1980 sell-offs of former nationalized giants British Gas and British Telecom.

Media reports say the part sale of Royal Mail could be worth up to £3.0 billion ($4.74 billion, 3.57 billion euros). The government previously said that it would take on Royal Mail's historic pension deficit.

"This is an important day for the Royal Mail, its employees and its customers," business secretary Vince Cable said in Thursday's statement.

"HM Government is taking action to secure a healthy future for the company. These measures will help ensure the long term sustainability of the six days a week, one-price-goes-anywhere universal postal service.

"By announcing today that we intend to move ahead with a sale of shares in Royal Mail, we are completing the third and final part of the reforms agreed by parliament two years ago."

Cable, a member of the Liberal Democrats which share power with Prime Minister David Cameron's Conservatives, confirmed Thursday that 10 percent of Royal Mail shares would be handed out to its employees free of charge.

Around 150,000 staff will be eligible to get a free stake in the business under Britain's largest employee share scheme of any major British privatization for almost 30 years.

The government has argued that partial privatization will allow Royal Mail the freedom to raise capital, continue modernizing and meet booming demand for online shopping delivery.

Royal Mail recently enjoyed a surge in annual profits thanks to the increasing popularity of online shopping which generates parcel traffic, and owing also to deep cost-cutting and big increases in stamp prices.

The coalition government relaunched plans to part-privatize Royal Mail three years ago and after the proposal was ditched by the former Labour administration.

Former prime minister Gordon Brown's Labour government scrapped the sell-off plans in 2009 as Britain struggled with recession following the global financial crisis.

Royal Mail continues to operate most British postal services even though its more than 350-year-long monopoly of the letter-delivery business ended in 2006 as new rules kicked in to allow rival operators.

While Brown's Labour government was seeking to offload a big chunk of the Royal Mail, it was also forced to nationalize or rescue several major British banks at the top of the global financial crisis in 2008.

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