Saving The Post Office: Norton Rose Fulbright advises the Post Office Limited as it offloads its telecoms sector to Shell Energy
March 4, 2021
3 min read
What's going on here?
Norton Rose Fulbright has advised the Post Office Limited on the sale of its telecommunications arm to Shell Energy Retail Limited.
What does this mean?
The deal, which was led by Norton Rose Fulbright’s London-based corporate team, alongside the deal team in the law firm’s Newcastle branch, was signed on 1 February 2021. Completion is expected to take place in March of this year.
The Post Office’s home phone and broadband business currently supplies approximately 500,000 customers and has been in operation since 2007. This transaction according to Nick Read, The Post Office’s Chief Executive, is “a good deal for The Post Office Limited, our postmasters and our customers…it allows us to concentrate and invest in our core products while ensuring payments to postmasters and continuity of service to customers”.
The FTSE 100 oil giant, Shell was selected as the preferential bidder, ahead of competitors TalkTalk and Sky. The Post Office and Shell Energy are expected to write to customers to inform them of the sale, and that they can expect to be moved across to Shell on the 15 March 2021, in a “seamless transition”.
What's the big picture effect?
Although the transition has promised to be “seamless”, and it has been noted that customers who currently pay their bills in Post Offices can continue to do so, could some of these 500,000 customers drop out of this service and look elsewhere?
The government-owned Post Office has been long-established as one of the UK’s trusted traditional brands. This comes in stark contrast to Shell, which is entirely privatised and has a questionable moral history. Over the years, Shell has been involved in a number of scandals as it has allegedly breached its legal duty of care by causing climate damage. These include undermining the Paris Agreement and being taken to court in 2019 by the environmental group, Friends of the Earth.
Loyalty to The Post Office’s brand can be shown in the figures. According to Citizens Advice’s 2017 consumer research, 81% of survey respondents described The Post Office as important to them, and 97% of consumers regarded it as ‘trustworthy’.
Those who chose to join The Post Office for loyalty or moral reasons may be unwelcoming to this transfer. For some, a sense of security comes in conjunction with government-led agencies. For example, government-owned agencies may honour contracts. Once a company has gone into private hands it could easily be sold on again, with a less rigorous due diligence process since less information is publicly known.
Arguably, this transaction perfectly illustrates the pathway of many state-owned activities which fall to privatisation. The Post Office announced its losses of £102m in 2006, raising concerns regarding the company’s ability to operate efficiently. As a result, the Post Office diversified its practices and began providing telecoms services in 2007. But it has come to a point where the company has to focus back on its core practices: its postmasters and customer-facing colleagues. It has therefore taken the decision to back-track and simplify its business model.
This could be a wise move for The Post Office overall. With telecoms advancing and broadening its scope through the introduction of 5G, The Post Office has decided to make this strategic sale before 5G reaches its full capacity. Since 2007, the amount of Post Office stores across the country have declined, with many being incorporated into stores such as WHSmith and the Co-Op as part of its franchising programme. Alongside this, alternative delivery services have been on the rise, for example, DPD has been voted the “best” parcel delivery service in the UK this year.
But The Post Office has a strong foothold in the market. It has the infrastructure in place, the postal delivery employees, the buildings and sorting offices in every major town and city in the country. If through this deal, The Post Office is enabled to re-focus purely on its core traditional activities, then the company could survive past its supposed ‘life expectancy’.
Report written by Hannah Parker
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