Ofcom says will not impose new price controls on Royal Mail

(Reuters) - Britain's telecommunications regulator said it would not impose new price controls on Royal Mail Plc's (RMG.L) wholesale or retail products, citing the declining letters market and increased competition in parcels.

Shares in Royal Mail were up 1.5 percent at 528.5 pence at 0729 GMT on the London Stock Exchange, ahead of a 0.7 percent gain in the FTSE 100 (.FTSE).

Royal Mail's prospects hinge on its ability to cut costs and modernise operations to gain a larger share of the parcels market in light of declining letter volumes.

"Assuming no changes between these proposals and the final settlement, this removes a potential negative for Royal Mail," Liberum analysts said.

Royal Mail said it was reviewing Ofcom's proposals and would issue a further announcement in due course.

Ofcom issued a provisional statement last July that Royal Mail had breached competition law by proposing wholesale prices that were more expensive for firms looking to run a rival delivery service. (http://reut.rs/23X18md)

The regulator expects to make a final decision on the matter this year.

(Reporting by Mamidipudi Soumithri in Bengaluru; Editing by Sunil Nair)