Deja vu as UK Post Office offloads telecoms arm (again)

Sky News has reported that the UK Post Office is in talks to offload its telecoms arm and insurance business, which has shades of the 1981 offloading of BT (albeit at a far more modest scale). Sky News says that the investment bank PJT Partners has been appointed to sell the telecoms business, with a price tag of more than £100 million.

The UK Post Office currently has 500,000 customers for its broadband and home phone services and annual revenues of approximately £150 million. Its secret sauce has been to allow customers to pay in cash at its counters, at a time when telecoms giants in the UK began ‘encouraging’ customers towards Direct Debit payments.

Post Office Ltd is a retail post office company in the UK (not to be confused with Royal Mail) which was founded in 1986. It offers a wide range of products from postage stamps through broadband services to banking but has struggled with losses, an abortive IT project (Horizon) and a sub-postmaster scandal that could cost it millions in compensation.

The sale follows a review by new Chief Executive Nick Read, who joined the Post Office around a year ago. He believes the Post Office should be focusing on its core business of mail, parcels, cash and banking services.

This is possibly best seen within the context of CEO Read’s own background. As the former supremo of the convenience store Nisa, he is well aware that offering a reduced range of the highest-traffic and highest-margin goods and services can help drive revenues and, more importantly, profit. This is a departure from the Post Office’s previous strategy which saw it accumulate a somewhat baffling array of 170 different products and services.

Selling its telecoms arm will do two things: 1. allow the Post Office to focus on its core business 2. provide a much needed cash injection.

While Sky News reports that there are already “unsolicited” bids for the telecoms business, whether Read’s approach will yield better results for the Post Office remains to be seen.