We are pleased to hear that the new management team are beginning to turn round the finances of the Royal Mail Group.

It is particularly encouraging that the mails business (the only part of the business regulated by Postcomm) increased its half-year operating profits to £41m (from £5m in the same period last year).

In our price control proposals we have already shown our willingness to facilitate the Group's three year renewal plan by proposing price rises amounting to £170m next year, followed by a price freeze for the following two years. Assuming the Group successfully implement their £1.4bn cost-saving programme, their finances should become very sound well before the end of this period.

It is also reassuring that the Group does not regard forthcoming competition as its biggest threat. Rather, its biggest threat is said to be the detail of Postcomm’ s price control proposals. We have already made it clear to the company that we understand their concerns and expect to be able to find a solution to them. If we fail then the company can ask the Competition Commission to adjudicate.