Royal Mail Saturday deliveries could end under Ofcom reform proposals

UK regulator Ofcom is set to outline options next week for reforming service obligations of International Distributions Services’ (LSE: IDS) Royal Mail unit, which could include allowing the company to scrap Saturday letter deliveries, Sky News learned.

Ofcom will publish a consultation paper on Wednesday that industry sources say may propose modifications such as altering first- and second-class delivery targets, providing state subsidy for universal service, and enabling Royal Mail to raise stamp prices. Also included could be reforms to the current six days a week universal service obligation, which could move to five-day delivery and see Saturdays removed.

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The consultation comes after Royal Mail appealed for changes to its regulatory system, under which it was built to handle 20 billion letters annually but now only manages seven billion, a figure expected to further fall. Moving to five-day delivery would need UK parliamentary approval.

International Distributions Services shares closed the week down -1.64%. Over the past year, the stock price has risen 11%. Ofcom’s proposals next week will outline options for reforming Royal Mail’s service obligations to match significant declines in letter volume.