ROYAL Mail yesterday vowed to "fight for every letter" when it loses its 350-year monopoly on deliveries on New Year's day.

The postal service market will be opened up on Jan- uary 1, allowing rival companies to collect, sort and deliver mail for the first time since the reign of Charles II.

Royal Mail faces competition from 14 companies, which have registered with regulator Postcomm to handle post in the UK, including German company Deutsche Post and Dutch postal service TNT.

Most of the competition is expected to be in business mail, which accounts for 80 per cent of the market and helped increase Royal Mail profits by 20 per cent to £159m in the first half of 2005.

Despite competition from European rivals in the UK, Royal Mail will not be permitted to compete in their countries because the markets on the Continent have not been liberalised yet.

Postcomm said competition would give customers choice and create a more efficient and reliable service.

Watchdog Postwatch backed the move, but unions have warned an erosion of Royal Mail's business mail operations could jeopardise the cherished but loss-making universal postal service, which guarantees daily deliveries across the UK. It loses 5p for every first-class letter delivered and 8p for every second-class letter.

Royal Mail said it was ready to take on its new rivals, but warned that its ability to compete would be hampered by years of under-investment, which meant only 50 per cent of its letters were sorted mechanically, compared with 90 per cent among competitors.

Spokesman David Simpson said: "Royal Mail will fight hard for every single letter.

"Royal Mail is determined to compete successfully in the open market, but in order to do so, we need a fair regulatory regime and the ability to invest £2bn in the modernisation of the business."