Royal Mail Accelerates Privatization Timeline
NEW YORK (TheStreet) -- A couple of months ago the UK government announced its intention to privatize the Royal Mail through a public stock offering as soon as April 2014. Spearheaded by Business Secretary Vince Cable however the timeline for a stock flotation has accelerated and could be as soon as the middle of next month. A formal announcement today would be the kick-off to starting the process.
As noted when this story first broke this is a very controversial step if it actually happens. Under former Prime Minister Margaret Thatcher there were numerous such privatizations of national assets but she felt the Royal Mail should not be privatized.
There are two large objections to the privatization. The first is on the part of postal employees who worry about cuts to pay and benefits and a possible reduction in the number of employees. Current pensioners will be safe because the UK government absorbed Royal Mail's pension obligations in 2009 but new management will have an obligation to shareholders to cut costs where possible and be hard bargainers for any expenditure including employees.
Sensitive to these concerns the government is trying to create a sense of ownership for employees by offering a 10% stake to postal workers which the Financial Times reckons to be 2,000 British pounds per employee based on a 3 billion British pounds market cap.The other big objection is whether a private Royal Mail will adhere to the same "universal service obligation" which was actually legislated in 2011. On the table for change, post-privatization, are deliveries six days a week and one price goes anywhere costs for consumers. There are numerous denials that the delivery won't be altered and the parliament would have to approve these types of changes but if they will commit to a stock offering then it would not be a stretch to think they would fully commit to changes that could make the service more profitable. The world for postal service has changed completely thanks to the creative destruction caused by email and texting. As I asked rhetorically a couple of months ago, how many bills do you now pay online, how many magazines do you receive in the mail and when was the last time you wrote and mailed a letter?
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV