By Mark Kleinman, City Editor
The boss of Royal Mail appeared to pave the way for increases to the price of first-class stamps on Tuesday as the newly-privatised company's soaring shares valued it at nearly £5bn.
In an interview with Sky News to mark the first day of unconditional trading for Royal Mail shares, Moya Greene said the postal operator's products were cheaply priced compared to many European rivals and that the company would need to be competitive.
"We are very proud of the value that we provide for 60p, but we also know that in that field, where we have structural decline on the letters side, we have to be very careful about pricing," she said. "We are very pleased that if you compare our prices to other countries in the European Union, if you look in various weight categories between zero and 100g, we are at the low to middle of the spectrum.
"I don't think you're going to see a company that is going to be senseless about the pricing lever [but] we [both] need to stay competitive and retain the loyalty of our customer base."
Asked if that meant a price rise was imminent, Ms Greene said:
"Well, we didn't raise stamp prices last year... The average UK household spends 50p each week on stamps. We have to price only for the value that we deliver."
Under a deal with Ofcom, the industry regulator, Royal Mail has the freedom to set the price of first-class stamps until 2019 while second-class stamp prices remain tightly-constrained.
In the prospectus for the sale of shares published last month, the Government acknowledged that price rises were possible but said:
"Despite the significant increases in prices that were implemented in April 2012, the UK letter market remains competitively priced when compared with European countries. Following such significant increases (including above RPI [retail price inflation] price increases in [the full year ending 2012], the directors expect any price increases to be broadly in line with the RPI over the three financial years ending in FYE 2016."
A Royal Mail spokesman denied that Ms Greene had been suggesting the imminent arrival of price increases.
Ms Greene appeared to back the view expressed by Vince Cable, the Business Secretary, that the 38% surge in Royal Mail's share price on Friday's trading debut represented "froth".
"I think the Secretary of State has called that one properly," she said. "We need to look forward to the next six-to-nine months. It's a pivotal moment. We are so proud to see the company get to this point in its evolution, but we...need to set reasonable expectations. I must say I agree with what he has had to say on that."
The Royal Mail also addressed the imminent threat of strike action with the result of a ballot of Royal Mail workers due on Wednesday.
"We have to find other ways to resolve differences. We cannot always just be pushing the button for industrial action. We have a very competitive offer [of an 8.6% pay increase over three years] on the table," said Ms Greene.
"We have to be very careful about disappointing our customers, disappointing the British people. The trust they have in our service can be easily broken. The channels of communication are always open. My message would be 'let us look forward and continue on the path we have started'."
Ms Greene declined to say whether a revised offer was on the cards in the next few days but said: "I can only say that the channels of negotiation continue. Let us see how we can get to a successful conclusion."
She also appeared to issue a veiled threat to Royal Mail staff, saying that a strike-free company was "the only we can continue to provide high-quality jobs with good protections and benefits. It is a competitive world that we are in, [so] if we ever disappoint our custs...then we put a lot at risk."
Ms Greene dismissed concerns that the Government was guilty of undervaluing the company and short-changing taxpayers, saying: "I think the Government has handled the execution of this very well to give us a very broad shareholder base.
"I think it is important that Royal Mail remains a British company. It is a cherished institution, it goes back 500 years."
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