Royal Mail's shares slide as Ofcom suggests capping prices
Royal Mail’s shares declined on Friday as Ofcom suggested imposing a cap on prices on the postal service business.
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The watchdog proposed it could roll back some of the commercial flexibility it granted the Royal Mail in 2012 to avoid hurting competition, according to a discussion document published on Friday.
In the paper, the regulator said it would assess the company’s efficiency, look at its position in the parcels sector and consider its potential ability to raise wholesale prices too high.
The discussion document outlines further details of the review Ofcom is undertaking on Royal Mail, which was announced in June.
Royal Mail said it would “continue to participate fully in Ofcom’s review”.
“In particular we will be highlighting the need for a consistent approach to regulation,” the group stated.
“Ofcom’s existing framework, put in place in 2012 was to have provided certainty for seven years. Royal Mail believes it has used the commercial freedoms granted by Ofcom in a responsible and appropriate manner to help secure the financial sustainability of the Universal Service in the face of significant ongoing change across the postal market.”
Royal Mail's performance has been improving since its privatisation in 2013 with demand for parcel deliveries rising. The group floated at 330p per share.
Shares sat at 503.95p at 14:56 on Friday, down 4.46% on the day.