Second-class submit ‘minimize to simply three days per week’ after takeover

Second-class post will be cut to just three days a week if billionaire Daniel Kretinsky completes his £3.5billion takeover of Royal Mail, according to reports.

The businessman, who has been nicknamed the ‘Czech Sphinx’ for his inscrutable nature, is planning on taking the UK’s 500-year-old postal service into full foreign ownership for the first time.

But the business mogul, who also owns a 10 per cent stake in Sainsbury’s and nearly a third of West Ham football club, could already be eyeing up plans to reduce Royal Mail’s current service.

At the moment Royal Mail must deliver first and second-class post to every address in Britain six days a week under its universal service obligation.

However Mr Kretinsky, 48, is reported to want to retain the six-day service only for first-class mail — which would attract a higher premium, according to The Sunday Times.

It is thought moving second class letter deliveries to every other day would save the company £300 million a year.

But the change would have to be signed off by the watchdog Ofcom.

Mr Kretinsky’s EP Group has offered Royal Mail parent company International Distributions Services (IDS) Ltd 370p per share, up from a 320p-per-share last month.

But Mr Kretinsky’s bid comes at a time of extreme duress for the Royal Mail, which is facing backlash over the suggestion that it might deliver non-first class letters every other day in order to save money.

The proposal would also see 1,000 roles scrapped through voluntary redundancy.

It’s a climb-down from a previous suggestion of scrapping Saturday deliveries altogether, which was roundly met with criticism from government and opposition MPs alike. 

IDS is ‘minded’ to accept the deal – as long as EP Group agrees to a series of demands that would protect the Royal Mail’s 500-year-old British heritage, such as keeping it headquartered and taxed in the UK.

EP Group also says it would protect employee rights and continue to recognise the unions that represent both Royal Mail and GLS staff.

The 508-year-old postal service was privatised in 2013 but it has struggled financially and has seen its share price plunge. 

Next week’s annual results from IDS – which also owns a profitable European parcels business – are expected to lay bare the Royal Mail’s dire performance with the company losing nearly £1 million a day.

Vince Cable – the Liberal Democrat politician who led the privatisation – this week defended his actions, which at the time saw the Government accused of selling the company on the cheap. 

He said its recent share performance vindicated the decision to sell at the price it did. Mr Kretinsky’s offer is just 40p more than the 330p share price in 2013. 

‘It’s a company with very deep problems stemming from the decline of its core business [letters],’ Mr Cable told the Mail. 

Kretinsky has amassed his £7.3 billion fortune in a number of industries, but made a lot of it buying unwanted coal, gas and other fossil fuel assets in a bet against the green transition.

The businessman has until May 29 to formalise his takeover of IDS.

The postal service says a peak of 20 billion letters sent in 2004/05 has fallen to seven billion last year and is expected to fall further despite the fact the number of addresses in Britain has grown by four million in the same period.

As a result, postal workers are delivering fewer letters to more addresses – an unsustainable model in its current form, the Royal Mail says.

It claims the cost of fulfilling its universal service obligation – the legal requirement to deliver post six days a week – is as much as £2million a day.

Royal Mail’s perilous financial situation has not been helped by workers walking out several times between May 2022 and July 2023 amid a row over proposed pay rises at the peak of the cost-of-living crisis.

Postal workers had their wages frozen in 2021 and were offered a two per cent increase plus a £250 one-off payment – which union the CWU balked at amid inflation rates of around nine per cent.

It led to the now infamous images of cage upon cage of undelivered post sitting outside postal depots across the country – and eventually Royal Mail convinced unions to back a 10 per cent pay rise and a £500 lump sum.

Nevertheless, the service has since axed around 10,000 jobs – made up of 6,000 redundancies and thousands of other workers not being replaced upon leaving.

Amidst this, spiralling costs and competition from other couriers like DPD, Yodel, Evri and Whistl eating away at its customer base, Royal Mail reported a loss of £1.044billion in the year to March 2023.

Results for last year are due any day now – but the half-year results to September show an operating loss of £383million, up from £278million the previous year.

That doesn’t include the period that saw Royal Mail fined £5.6million by Ofcom after failing to hit delivery targets.

Only IDS’s international shipping arm, the Amsterdam-based GLS, is profitable, helping to offset the woes of the British business.

Kretinsky already owns part of a European postal service, the Netherland’s PostNL – prompting speculation he may seek to merge the two.

He also has stakes in several British companies already – and is said to be something of an anglophile with a heavy interest in Britain and its history.

The majority of Kretinsky’s wealth derives from his control of energy giant EPH, which has power plants in Devon, Lincolnshire, North Yorkshire and Northumberland.

A sports fan, he has been chairman of his boyhood club, 37-time Czech champions Sparta Prague, since 2004, and owns 27 per cent of West Ham.

He holds a stake in the French edition of Elle and previously owned part of Le Monde. The billionaire has also explored a bid for the Telegraph.

He and his girlfriend Anna Kellnerova, an heiress and champion showjumper, are one of the world’s richest couples.

At 27, she is one of four children of Petr Kellner, who was the Czech Republic’s richest man until he died in a helicopter crash in Alaska in 2021, aged 56.

But it remains to be seen whether Kretinsky is a friend or foe – at a time when Royal Mail’s reputation is in the gutter.

Less than half of the British public have a positive impression of the UK’s primary postal delivery service, according to YouGov.

Last year, former Ocado boss Simon Thompson quit as boss, leaving the company hunting for its fourth leader in four years.

And its declining reputation will not be helped by the rising cost of posting letters and parcels through the network, which has risen exponentially since privatisation.

Last month, the price of a first-class stamp was increased to £1.35 and a second-class stamp rose to 85p. Two years ago, they cost 85p and 66p respectively.

In 2015, Mr Kretinsky bought 15-bedroom Heath Hall in Hampstead for £65million, and once rented it out to Justin Bieber for £27,000 a week during a British tour. 

The UK government said it was ‘monitoring these developments closely’ and that it would ‘engage with the bidder at an appropriate time to explain our expectations for the future of Royal Mail.’

‘Our priority is to ensure that Royal Mail customers get the service they deserve… regardless of the owner,’ it said on Wednesday.

But chancellor Jeremy Hunt is wary of any foreign takeovers of British institutions following the crisis at Thames Water, which could yet be renationalised because investors are refusing to pump additional money into the provider.

Thames, which has £18bn of debts, could be taken into government ownership if it cannot find short-term cash – but it wants permission to hike bills by 40 per cent, pay lower fines and still be allowed to pay out dividends to shareholders.