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The instructions are in the mail. Well, not quite. But Royal Mail is inching towards privatization, with the appointment of a book-building syndicate of banks likely within weeks. Already, the U.K.'s state-owned institution is sounding out investors informally.

Business minister Michael Fallon reports interest from overseas buyers, although the official preference is for a float in which employees and private investors end up owing much of the business. Achieving that will require skillful politics: customers worry services will suffer in pursuit of profits, while the main union is hostile to ownership change. Still, Mr. Fallon's declared aim is to introduce external capital during 2013/14. Market conditions, at least, look helpful.

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Ultimately, every business has its price. But certainly saleability has been improved, partly by divorcing the Post Office operations from Royal Mail (with contractual relations between the two), and by transferring historic pension liabilities to the government.

Also, while Royal Mail retains a universal service obligation, its new regulator has indicated that a 5- to 10-per-cent margin, at the earnings before interest and tax level, would be appropriate for these activities.

That said, the 3-per-cent operating margin (for the six months to end of September) looked very sad. Mail operations at Deutsche Post – also facing structural decline in letter volume and offsetting Internet-driven growth in parcels – made 7.5 per cent in 2012. Royal Mail's European parcel business, GLS, was more presentable, returning over 6 per cent, but this is only 16 per cent of revenue.

Part of the answer may lie in more automation: Deutsche Post's annual capital expenditure in its mail unit has averaged €350-million ($460-million) recently. Royal Mail's capex was £150-million ($231-milion) in the last half-year, a run rate which should continue. Improvement potential can appeal. But price must also be right.

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