Britain's Royal Mail warns on competition threat from rivals

LONDON, Nov 26 (Reuters) - Britain's Royal Mail (LSE: RMG.L - news) postal operator warned that competition from rivals like Whistl is undermining the financial sustainability of its legal obligation to deliver mail across the country six days a week.

Appearing before a parliamentary investigation into competition in the postal sector, Royal Mail Chief Executive Moya Greene said that the emergence of rival delivery services who are able to focus on densely populated, profitable areas was putting pressure on the firm.

"If you allow cherry picking in the urban areas you undermine the economics," Greene said on Wednesday. "It siphons off very quickly a lot of revenue -- more revenue than can be offset by even very vigorous efficiency measures and it makes the Universal Service unfinanciable and uneconomic."

Sitting alongside Greene before lawmakers, Whistl CEO Nick Wells said his services were focused on urban areas, but that was the only viable way to launch a competitor. He said the advantage was offset by the rates they paid Royal Mail to deliver to other parts of the country.

Whistl, a unit of Dutch mail group PostNL that was formerly known as TNT Post UK, has since April 2012 been delivering mail itself in Manchester and London without using Royal Mail's network, and has plans for a wider service.

The firm also collects and sorts mail in certain parts of Britain before handing it over to Royal Mail for delivery through an access contract. (Reporting by William James, editing by Louise Heavens)