British business minister, Peter Mandelson's call for part privatisation of the state-owned postal operator, Royal Mail, has bought angry response from labour supporters and the unions, who fear that as many as 50,000 jobs could be lost if the Dutch logistics company TNT goes ahead and buys a minority stake in the company.
The unions are bitterly opposed to such a deal as a review conducted by Richard Hopper, a former deputy chairman of Britain's media watchdog, and circulated among ministers suggests that the government should close half of its 71 mail centres and privatise the other half, which in turn would be broken up into different units where rival operators would be invited to buy stakes in the collection and sorting units while the 'last mile' delivery would be retained by the Royal Mail.
Presenting the findings of the independent review to the parliament, Mandelson said that the barring Royal Mails retail outlets all other operations needed to be part privatised in order to be commercially viable. "We and the Royal Mail have already received one expression of interest from the Dutch company TNT to build such a partnership."
"I very much welcome this approach; just as I will welcome other expressions of interest from other partners should they come forward. My department will pursue this in the coming weeks," he added.
Mandelson said that the findings of the review done Richard Hooper had suggested that new measures was required to revive the company such as "forging a strategic minority partnership" with a private company.
Even as the UK government ponders absorbing the £22-billion pension fund liability of the company, in order to make it more lucrative to investors, the Telegraph has reported that the government has already made plans to sell some parts of the Royal Mail to TNT for approx $4.5 billion.
Commentators opine that in the recent past due to the global economic slowdown, TNT has been cutting costs by slashing jobs and closing many of its offices in the Netherlands and was said to be on the verge of being acquired in August by the world's largest logistics company, United Parcel Service for $15 billion (See: UPS eyes TNT for a $15 billion acquisition)
TNT's mail division has not fared well last year with profits plunging by 17 per cent to about £550 million due to a decline in volume of mails as customers switch from letters to e-mails and mobiles.
Lord Mandelson said the government was saving Royal Mail by investing in its future as according to the review report, many Western countries mail service was more efficient and automated compared to the Royal Mail.
Last year, although the UK government had injected £3.9 billion into Royal Mail, its sorting is so outdated that postmen still sort out the mail manually as they go on their rounds by house numbers and street names whereas in Europe, 85 per
Labour costs accounts for 32 per cent of TNT's sales whereas Royal Mail's labour cost is 66 per cent and it reflects the high pay doled out to its employees as well as the high number of part time staff the company has.
Unions are worried that any plan to part privatise the company may lead to as many as 50,000 jobs being lost from a total work force of 1,70,000 although it welcomed the government's proposal to reduce Royal Mail's pension fund deficit.
Commentators feel that even if TNT ultimately takes a stake in Royal Mail, it will find it very difficult to restructure the company as it may not get the freedom required to make wholesale changes as it was a old fashioned and it would also depend on how much the regulators will give them the leeway in making those much required changes.
They also said that any buyer may not have to pay any money for its stake due to the large deficit in the pension fund