The Royal Mail has struck its first deal to deliver mail for a commercial rival, in a landmark agreement with Deutsche Post.

(The agreement) demonstrates Royal Mail's commitment to opening its network

Gillian Wilmot, Royal Mail

Under the deal, Royal Mail will deliver letters for Deutsche Post, which was recently awarded a license to collect business mail in the UK as part of government plans to liberalise the postal services sector.

Deutsche Post will pay Royal Mail 21.9p per letter for next-day deliveries, and a maximum of 16.3p per letter for standard class deliveries.

Those charges compare with Royal Mail's current collection and delivery fees of 27p per letter for first class mail and 19p for second class mail.

Breaking new ground

Gillian Wilmot, Royal Mail's managing director of mail markets, described the agreement as " ground-breaking."

"(The agreement) demonstrates Royal Mail's commitment to opening its network," she said.

Some postal services, including business mail, have already been opened up to competition, with Deutsche Post, Business Post Group, and Hays plc among recent market entrants.

But the market is to be fully liberalised in three phases by April 2007.

The next phase in the process is due to come in January, when private sector firms will be invited to bid for bulk mail delivery contracts.