The first step on the road to significant liberalisation of the postal market has been announced by the Minister for Public Enterprise, Ms O'Rourke.

Adhering to an EU directive, she said that, from today, postal items weighing 350 grams or more (or costing at least five times the basic letter rate of 30p) would be subject to competition.

This exposes £14 million (euro 17.78 million) of An Post's annual revenues, and among the companies likely to be its competitors are DHL, Securicor, United Parcel Services and TNT. Other smaller operators are also likely to enter the market.

While this is small, considering An Post had a turnover of £368 million last year, the effect was described as "the first move in a gradual process" by sources last night.

Depending on the outcome of final EU negotiations, the European postal market could be 100 per cent liberalised within the next 10 years, which would have significant implications for An Post.

The EU has agreed that another 25 per cent of the market will be opened up in 2003, with the rest some time after that.

At stake at present in talks is whether all mail services - including domestic mail - will be open to competition at some stage. Proposals from member states are due to be presented on this issue by the end of the year.

The Department of Public Enterprise will now, as part of the EU directive, have to set up a regulator for the postal service, although there was no indication yesterday of when this might happen.

The chief executive of An Post, Mr John Hynes, welcomed the announcement and said it was a watershed.

"We have been preparing for this development and we are discussing with our trade unions the implementation of a group plan which will enable us to meet the challenge of competition," he said.

He added that the exact nature of the regulatory regime in the future would be crucial.

Ms O'Rourke said the regulatory regime would be "light handed" and the requirements for licensing new operators would be "limited as far as possible".

She said An Post would continued to provide a universal service - a comment repeated by the company.

Under the EU directive, agreed in 1997, An Post is "obliged" to provide this service at affordable rates to all customers.

There is also a provision in the EU directive for transparency in rates, which will have to be met by all the main State operators across Europe.

A spokesman for the Department of Public Enterprise said one issue to be dealt with in the new era of competition was that "cherry picking" would not take place. For example, this could happen if companies only served customers in the Dublin area.

The growth of electronic communication is expected to have a major effect on postal services in Europe, reducing the amount of letters sent. However, the increasing presence of e-commerce could prompt a growth in the parcel sector, with goods being increasingly delivered rather than picked up by customers.

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