Royal Mail Falls as Ofcom Leaves Post NL Service Unregulated

Royal Mail Plc shares fells as much as 3.9 percent after the U.K. communications-industry regulator Ofcom said there’s no need to tighten rules governing rival operators led by Post NL’s Whistl.

Competition in the end-to-end postal market, where companies collect, process and deliver mail, isn’t so advanced that it poses a threat to Royal Mail’s universal service obligations, under which it must distribute letters and parcels six days a week to every U.K. address at a uniform price.

At the same time, Ofcom proposed new rules to take into account differing costs -- such as city deliveries versus those in the countryside -- which Goldman Sachs said in a note will make it tougher for competitors to cherry-pick the best areas.

“Ofcom has today concluded that the universal postal service is not currently under threat,” the regulator said in a statement, while adding that it will initiate a broader review of factors affecting Royal Mail’s ability to comply with delivery obligations that will report back next year.

Shares of Royal Mail, which first sold stock to the public last year, fell 16.20 pence to 401.9 pence before trading 3.3 percent lower at 404.2 pence as of 9.59 a.m. in London. The stock has declined 29 percent this year, valuing the company at 4.1 billion pounds ($6.4 billion).

Ofcom said it reached its decision in light of a slower-than-planned rollout of services at Whistl, which is delivering to only 7 percent of the U.K., versus a targeted figure of 15 percent by the end of this year.

The company -- formerly known as TNT Post UK -- delivered only about 0.5 percent of letters in 2013-14. Parent Post NL, which is based in The Hague, rose as much as 1.2 percent in Amsterdam before later trading little changed.

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