Monday, 7 October 2013

Royal Mail now...BBC next?

It is not that surprising for the Government to put the Royal Mail privatisation away at a good price. After all, its a dog of a business with a limited future. Think Yellow pages of 5-10 years ago. The model of delivering me 90%+ junk mail is a poor one and the likes of Amazon etc are edging into full-time competitive behaviour or doing joint ventures with commercial rivals like Argos.

Royal Mail has a strongly unionised workforce and a commitment to the Government to maintain unaffordable business like universal delivery. So to sell the idea, they price it cheap, don't account for land values and let this slip pre-IPO as well as taking on the pension liabilities for the taxpayer. It's a good story for investors today and if you trade the share there is a good chance of making a nice 15%-30% upside. Long-term, a dog is a dog, the world is not going back to sending hand-written letters and nor will people always send real Christmas cards which is a significant chunk of the business.

However now that this taboo is broke ,we know there will also be public offers for Lloyds in Q1 of next year and possibly for RBS too. Merrily, a slate of privatisations. This leaves one commercial monster out there for the Government, the BBC. This would be the holy grail as the BBC is after all a very good business with a market share that won't easily be attacked by the competition and some very strong content and services, like its website, that should prevail even in a competitive market. Plus, subscribers, that is everyone, can be given shares for free on account of them building up the business.

If these privatisations prove popular in the short-term then this should be in the manifesto's of UKIP and the Conservatives for the next term of Parliament. It's for the BBC to work out how it copes with the end of state-enforced revenue-raising, but I have a feeling that a giant endowment from the sell-off will go a long way to easing the blow.

26 comments:

Blue Eyes said...

I have put in for RM shares, how easy will it be to offload them in a few months time?

Genuine question - I have never traded shares before...

hovis said...

have you seen Raewald's take on this RM privatisation - interesting comment and I would tend to agree.

DtP said...

As per Hovis - does smell a bit cronyistic.

Blue Eyes said...

Houvis, he sounds a bit like Chuka.

You do realise that institutional investors invest on behalf of the little guys, don't you? And there is nothing to stop "white van man" (what an awful out of date stereotype) getting some direct himself. All you need is the internet (it took me about five minutes). Most of us have pension pots and ISAs which are run by these supposed Tarquins. Presumably we should elect Pied Piper Miliband and drive the Tarquins out of London.

I agree that generally this government has not been as populist and levelling-up as Thatcher's but this is a poor example IMHO. Also, remember that most of Thatcher's big reforms came in her second term, after she had persuaded the voters that the tough medicine she prescribed could work. See any similarities? Or did you really expect a Cam-Clegg coalition to slash spending and sell off all the assets on day one? The voters simply did not vote for that. Our democracy is flawed, but it is a stretch to say that in fact what should really happen is for the government to run a strongly rightist agenda.

I understand why right-wingers are grumpy. I'm sometimes fairly grumpy about this government too. But the way to get a more right-wing government next time is not to bitch about Cameron and Osborne being "toffs" and getting Ed Miliband in.

Which leads me to the BBC. There is no major appetite for getting rid of the BBC. It's a strongly right-of-centre grump held by about 3% of the population. By all means stick it in the UKIP manifesto, but it's not something most voters are clamouring for.

dearieme said...

I do hope that the privatisation of the BBC is not viewed as a mutually exclusive alternative to hanging some of the bastards.

CityUnslicker said...

BE - you should make about 20% in a week or two is my guess. Sell then and enjoy a nice meal out. After a couple of months who knows what the situation will be.

Hovis - I agree with BE. Labour were going to do this and are now moaning. if you want to buy these shares its remarkably easy. Labour as ever are on the side of the lazy fat bloke on the sofa who cries foul that others might sieze upon an opportunity - 'it ain't fair, guv.'

Anonymous said...

Royal Mail is not a letters business and has not been for a number of years. They barely even have the facilities to sort letters anymore. They're a now a parcel service who out outsources letters to companies like UKMail who have access to the postmen through Downstream Access (DSA).

Royal Mail currently loses money through DSA so if people stopped sending letters entirely they'd make more money.

They've already started charging a flat fuel surcharge to business customers which I imagine will vary depending on post code in a couple of years and thus bypass the universal service.

Timbo614 said...

Please, please stop giving them the idea of privatising the BBC, there must remain one bastion against the endless, mindless adverts.

Please stop now! (thank you).

Bill Quango MP said...

Been with the posties last week. They have to stay in for three years...but are mostly looking pretty chipper. Except the most militant loons who think the world has ended but there's still time to reverse the inevitable.

For anyone else thinking of staying in, have a look at the registrations of your postal vans. lots and lots of 55s and 59 plates.

I expect the new owners of RM will have a bill for some 10,000 vehicles.

Also for the future CU is right and wrong.

Right, in that no-one is going to start writing letters again.
Wrong about Xmas cards {unless RM really do screw up the posting prices, which they almost did 2 years ago - E-cards have been around for about 10 years and are universally hated.}

And wrong{ish} about the future.
Internet shopping is still in its youth. There is a lot of growth to come.
The reports from the US shows it is gearing up for a monster, monster Thanksgiving shopping spree. Of which only about 30% will be online - despite 70% of people preferring online.

And more people in the US use online than in the UK, so we have even further to go {Though I would expect UK is the most e-commerce nation in Europe by a big margin..must look up those figures one day. But we are a small and dense nation so perfect for etailing..

CU is correct that the retailers are looking to partnership with courier firms. But the baby couriers, Parcels2Go, Hermes etc suffer from being too small, too crap, and they don't make any money either.
Royal Mail/Post office is on the brink of signing up to Collect+.

That puts the mail delivery/collection companies in the same bed. Will be interesting.
Expecting RM to collapse and fail is like expecting British gas to collapse and fail.
Its too big and too dominant to fall easily. And RM has already had its privatisation shock in 2005 when Tony Blair effectively privatised the mail..and made a huge economic mistake in doing so.

Whith that, and joining the Euro, the rebate return and open borders with eastern Europe, any one would have thought he had wanted to prove his Eu creds for some sort of presidency or something?

hovis said...

Interesting the vehemence that my off hand comment seems to have generated.

The point made elsewhere was that the privatisation was focussed on the big boys and not an exercise in polular capitalism. So the narrative of benefits to the big boys, nothing for white van man/ the man on the clapham omnibus (insert favourite description here.)

Institutional investors invest for many of the "little guys" invested in the mutual funds usually indirectly. So indeed many people have their (false) hopes tied up in them. Do they acheive "alpha" to justify their (rather handsome) fees? No. Is their utility then simply act as stags when they have greater access to IPO offers?

Graeme said...

Timbo - the BBC is crammed full of adverts for its own programmes! For example, 15 minutes before the end of a radio programme, the presenter of the next programme comes along to tell us what he/he will be playing. Then, when he starts the programme, she reiterates what he said 15 minutes previously. And in between the programmes, you get a collection of plugs for forthcoming shows.

Blue Eyes said...

Houvis I don't really understand your second comment. My comment was a critique of Raedwald's rather grumpy Chukanomics "it helps the evil bankers" line. The City is enormously competitive, so as a free-market kinda guy I have to assume that if these "Tarquins"* are overcharging a little guy will come in and do the same job for less.

I imagine that the 70/30 wholesale/retail split was roughly worked out. Bear in mind that the G did not want to have a flop on its hands nor did it want to underprice the shares too much. Tough call. Reading some of the coverage I think the policy is probably roughly right: a certain amount given to the employees, some earmarked for sae with more available if demand was strong. Presumably Houvis you know better how much should have been earmarked for retail and how much to the Tarquins better than George and Vince? What split would you have preferred? How would that have affected the overall amount raised? Let's have some figures.

BQ I like your positivity. I have long thought that there is a huge gap in the market to deliver stuff to people who are out at work all day. It baffles me that there is so little flexibility offered to online retail customers. This problem must affect a huge majority of households - not every home has a flexible worker or stay-at-homer.

I am hoping that one of the Mail's first acts is to sell off the Vauxhall plant for development. It's an eyesore that I have to run past too often!

* no snobbery there at all, no siree

Anonymous said...

A poster above claims "there is no major appetite for getting rid of the BBC".

But there is a major appetite for getting rid of the annual £145.50 TV Licence tax, imposed on everyone who owns a television set, irrespective of whether they watch the BBC or not, or even if they detest everything the BBC stands for.

Any political party who proposes abolishing that tax would sweep the country. And then the BBC would have to earn its own living, like the rest of us.

Ryan said...

I think we should sell off the BBC now for the simple reason it is finished anyway.

I was asking some young women in one of the clothes shops about the name of a character in one of the popular TV soaps. Not one of these young women had EVER watched the show. Allegedly it has viewing figures of 14million+. Clearly young women are not amongst the viewers, even thought they are part of the target audience.

Fact is that really TV these days is only watched by middle-aged women and pensioners. My two boys only watch about 30mins a day (TopGear repeats on Dave or "2 and a half men") and that's under duress because they would rather be chatting to mates via computer, iPhone or xBox.

Fact is that the telly is living on as much borrowed time as my dear old dad. Nobody has any need of it anymore. Young people find it a bit bizarre I think. Lots of middle-aged people talking about stuff of no interest or movies they don't want to watch and can buy to keep for 3 quid. Gone are the days when everybody in the UK sat down to watch the Morecombe and Wise Christmas special or when kids would spend the whole schoolday reciting the Goodies best sketches.

Sell the BBC off while we can get something for it.

DtP said...

I love that word 'Chukanomics' - highly amusing!

andrew said...

if the cons go in to the next election with a pledge to sell the BBC, and labour oppose, how does the BBC provide balanced election coverage?

Demetrius said...

That building in Portland Place would make a nice block of flats to sell to foreigners engaged in capital flight from faraway places or needing some help with tax evasion.

Bill Quango MP said...

Freeview +1 services came in around 2004. certainly by the retune of 2009 all the biggest of the uk players had +1.

except the BBc who are stil 'thinking about it'.

Bless.

Timbo614 said...

I actually don't watch much telly myself :) Top Gear when I feel like a laugh always Recorded. Formula 1 - Always recorded too. The news (live!) and QT - which I watch on the computer 'coz its a bit boring and I have a two-screen good enough computer so I can play poker or read other stuff at the same time.

The occasional drama (90% again recorded). The last time I watched live commercial TV, I gave up. Lost the plot. Just unbearable amount of adverts :(

I also think that £145 a year is cheap for what you get.

DtP said...

@BE & CU - I'm totally with Hovis on this & Readwald - as per usual Osborne's missed the trick. It's not the IPO, it's the opportunity lost by not taking the piss out of Labour. Mandleson was all over this - it's been out of date for ages.

The charge of 'Tarquin' sits because both Cameron & Osborne are strategically inept but as has been mentioned, C@W passim, Mr Lynton Crosby is in town and he's doing some housework. The RM holds a function exigent of its function - it provides emergency. Ofcourse it's sensible to sell it quick but it's a fight not had.

If the fight is about a blanket elimination of benefits for under 25's with tuition fees and 'help to buy' mortgages or flogging the Royal Mail, well....... Matthew Hancock has been promoted! Fuck me rigid - it truly makes a mockery of yer know, life and stuff. Tarquin? Yeah, that's the gits name, Tarquin.

Blue Eyes said...

Except Raedwald's criticism was that Goldman Sachs et al. had been given too many of the shares vs being sold direct.

Those of us who aren't interested in spin but in what the government actually does are pleased that the RM has been sold. I couldn't give a monkey's if it was Mandelson's idea or if Chuka wouldn't reverse it.

Anonymous said...

@Ryan

Even the super "popular" TV shows - think Game of Thrones, Breaking Bad, etc - generally get less than 5m viewers even in the US. Yet these are the type of shows I only ever hear anyone talking about. There's clearly some kind of demographics divide.

I don't think the BBC has had a trendy non-comedy show for decades. Channel 4 was always the cool channel.

Also I'm always interested where they get the ratings for the radio as well. 5 million listeners? Where?

Then again pirated copies of the Essential Mix from Radio 1 do regularly get 500k plays on Soundcloud alone but the BBC has it on at 1am and most people in the UK under 40 have never heard of it. Has there ever been such a widely pirated radio show except for maybe Ricky Gervais' podcasts from a few years back?

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