POLITICS

Royal Mail Risks £160m Fine In French Anti-Competition Probe

16/07/2014 12:09 BST | Updated 16/07/2014 12:59 BST
ASSOCIATED PRESS
A Royal Mail postman sorts the mail next to his van van ready to deliver the days mail in London, Tuesday, April, 1, 2014. Britain's public-spending watchdog says the government cost taxpayers millions by selling off the Royal Mail at too low a price. The National Audit Office says shares in the postal service were sold "substantially below" their actual trading price. Royal Mail shares were offered at 330 pence (US$5.49), but on the first day of London Stock Exchange trading in October closed at 455 pence (US$ 7.16). They traded Tuesday April 1, at 565 pence (US$8.89).(AP Photo/Alastair Grant)

Royal Mail is facing a fine estimated by analysts at up to £160 million after it announced that its loss-making French parcels operation is being investigated by competition authorities.

The FTSE 100 firm, privatised last year, disclosed that it was facing allegations of "breaches of antitrust laws" by GLS France.

It said the notice from the Autorite de la Concurrence was in connection with a broader investigation into "alleged activities within the industry" in the country. Rival TNT Express issued a similar statement.

Royal Mail said: "We are currently considering the notice received from the French regulator. Given the early stage of this matter, we cannot yet determine the amount or range of potential loss; however, it is possible that it could be material."

GLS is a Europe-wide parcel delivery service acquired by Royal Mail in 1999, that bought its French unit - which was originally founded in 1979 - the following year.

Results for the 12 months to the end of March this year showed that the wider GLS business reported operating profits of £108 million on revenue of £1.65 billion.

But they showed that GLS France, which is in the midst of a turnaround programme, made a 27 million euros (£21 million) loss, though this had been reduced by 3 million euros (£2.4 million) from the year before as the business cut costs.

Analysts at Espirito Santo Investment Bank said the worst-case scenario from the regulatory probe could see GLS fined 10% of turnover, or £160 million, but that this would still be "relatively insignificant" for the wider Royal Mail group.

TNT Express said it had received a statement of objections from the French competition authority in relation to alleged anti-competitive behaviour in the French parcels delivery sector, including TNT Express France.

The company said it had co-operated with the investigation since it started in 2010, and said it could not rule out being fined "for a material amount".

A spokesman for the French regulator confirmed that it was carrying out an "ongoing investigation" in the parcel delivery sector.

But he said he could not give the names of the companies involved nor details of the alleged practices being investigated.

Royal Mail shares - which soared to more than 600p after it was floated last year at 330p - have fallen back from that peak and dropped below 500p more recently. They slid again in the wake of the latest announcement.

Mike van Dulken, head of research at Accendo Markets, said: "The statement this morning that fines/ losses could be material sounds ominous but likely just cautious at such an early stage, but after all the talk of the group being sold off too cheap last October it just goes to show that even previously nationalized entities - still 30% government owned - aren’t whiter than white and represent risks to investors."

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