Britons Leery of Plans To Privatize Post Office

Thousands of popular sub-post offices may be left out of the plan

THE Post Office is about to become the latest British state-owned industry to get Thatcherite privatization treatment.

Michael Heseltine, the trade and industry secretary, is planning a two-stage sell-off of its letters and parcels divisions to private and institutional shareholders, Post Office sources say.

Post Office managers have already held talks with S. G. Warburg, the merchant bank now helping the Dutch government to privatize its postal service.

Mr. Heseltine is expected to present his proposals to the British Cabinet in the next few weeks. He will urge the government to back moves to sell up to 50 percent of the corporation's profitable Royal Mail and Parcelforce subsidiaries in the first stage, offering the rest of the government's stake later on.

Privatizing the Post Office promises to be a more complex and politically sensitive exercise than earlier, successful sell-offs of British Airways, British Telecom, British Steel, and other state monopolies.

Most touchy of all is the future of about 19,000 sub-post offices in Britain. They serve suburban and rural communities, and members of Parliament say suggestions that the Post Office may be privatized always produce a flood of complaints from constituents.

Heseltine, though publicly on record as favoring privatizing the postal services, is likely to leave the sub-post offices out of his initial sell-off plan. His officials concede that if private operators took over the sub-post offices, they would be strongly tempted to close many of them because they are unprofitable.

The Royal Mail and Parcelforce, on the other hand, are money-spinners. Last year, the Royal Mail letter service accounted for 90 percent of the Post Office's pretax profit of 283 million ($422 million). This year's profit is expected to exceed 300 million.

The Royal Mail has a monopoly on all letter deliveries in Britain priced below 1. Parcelforce is required by law to provide a nationwide delivery service.

About 4,000 privately owned parcel delivery companies are under no such obligation. If Parcelforce is privatized, Heseltine expects to come under pressure to make sure that it continues to deliver items throughout the country.

One of his strongest allies, as he prepares his privatization formula, is the Post Office itself. Bill Cockburn, its chief executive, has already held talks with a Warburg team. Afterward, he confirmed that there was a high level of interest among institutional investors.

Mr. Cockburn has called on Heseltine to offer the Royal Mail and Parcelforce for sale as a single company. ``It doesn't make sense to sell them off separately,'' he says.

Cockburn says he does not like the idea of delaying a government decision to go ahead with privatization.

A Post Office official notes that in the United States the Post Office delivers only 10 percent of overnight mail. ``If the government waits too long, commercial operators will expand their activities and cramp our room for maneuver,'' he says. ``We also have to take account of rapid growth in the use of fax and other forms of electronic messaging.''

It has been reported that once KPN, the Dutch postal service, is privatized next month, it is likely to offer bulk mail services to clients in Britain in direct competition with the Royal Mail and Parcelforce.

Heseltine, however, is unlikely to let himself be stampeded into taking precipitate decisions. Last year, he inadvertently whipped up a political storm when he suddenly announced the closure of most of Britain's coal mines.

Amid unprecedented public protests, government members of Parliament demanded that he backtrack and order a public inquiry.

The government has also gotten itself into trouble over the sell-off of public water utilities, many of which put up their price to customers within weeks of privatization.

Heseltine has no intention of burning his fingers over Post Office privatization, his officials say. And there are indications that the sell-off plan will be prepared with enormous care.

According to one parliamentary source, Heseltine will offer Post Office staff substantial discounts on the purchase of shares. This would be intended to gain their support for privatization.

Sources in London's financial district say the first stage of Post Office privatization would likely yield around 1 billion.

Any announcement of the privatization scheme will probably be delayed until after elections to the European Parliament on June 9.