LONDON, June 13 (Reuters) - Britain's second largest postal firm TNT Post will expand deliveries in London next week, in its latest move challenging state-owned Royal Mail's dominance.
TNT Post, which is owned by Dutch mail group PostNL and handles 3.8 billion items a year in the Britain, wants to deliver business post to doorsteps across the UK in five years time.
This would provide Royal Mail with competition on the "final mile" for the first time in its more than 370 years of service.
Royal Mail has criticised the move as threatening to jeopardise its ability to sustain a universal six days a week, anywhere service. Its concern is that TNT Post can target delivery to only the most profitable parts of the post bag and ignore the rest.
Britain, meanwhile, is aiming to privatise Royal Mail this year via a London stock market listing.
Last month, the government appointed Goldman Sachs and UBS as the lead banks to run the initial public offering (IPO), which could value Royal Mail at 2-3 billion pounds, making it Britain's biggest privatisation for 20 years.
TNT Post UK Chief Executive Nick Wells welcomed the flotation plans, arguing that privatisation would make Royal Mail and the industry more competitive. He also disagreed its roll out would hit Royal Mail's universal service obligation.
"If you look at other international markets where end-to-end competition does already exist, in places like Germany, the Netherlands, Sweden, Spain... the universal service was not under threat and indeed quality has increased and prices were kept at a reasonable level," Wells told Reuters.
"Look at other markets, can you imagine an air travel market where there is only one dominant supplier? Prices would go up and services would deteriorate. I think this is good for Royal Mail and good for the industry."
TNT has been delivering mail in west London for over a year and said from next week it will now do the same in south west London. Elsewhere, the firm currently collects and sorts post before handing it over to Royal Mail to deliver what is known as the 'final mile' to residential addresses and businesses.
Together with its parent company, TNT Post is hunting for a partner to help fund a national roll out that could put 20,000 orange and black clad postal workers on Britain's streets.