Royal Mail float. Oz Post next?

The newly elected Coalition Government will be keenly watching developments in the UK with the announcement overnight that it would float the Royal Mail.

As Eureka Live reported this week, Australia Post ranks high on the list of privatisation proposals for the incoming Abbott Government, along with Medibank Private, as it examines ways to hack away at the federal budget deficit.

The UK Government has attempted to privatise the Royal Mail service four times in the past 19 years. But, like Australia Post, and against all predictions, the internet revolution in recent years has turned the operation into a profitable enterprise.

Parcel delivery for online purchases has created a large scale profitable enterprise that utilises the postal business's vast distribution networks.

The UK government will retain ownership of the post offices but will float the mail and parcel delivery services, which is expected to be worth 2.5 to 3 billion pounds.  Analysts expect the operation to yield around 7% at that price.

Since his appointment as Australia Post chief executive, Ahmed Fahour has shifted the organisation's focus towards a more commercial approach, in particular, expanding its freight capacity for online purchases that has lifted earnings substantially.

It's "Future Ready" strategy has delivered two years of earnings growth, with a 16.6% lift last year to $281 million which included a $2 billion infrastructure investment to accommodate the rise of the digital economy.

Just as Telstra had a universal service obligation to provide telecommunications to the general population, Australia Post must deliver the mail. Regulated mail losses last year widened to $148 million.

That would have to be worn by a completely privatised Australia Post. Either that, or the Federal Government could retain the "snail mail" and sell the growth businesses.