THE Royal Mail is to take on 118 118 and BT this week with the launch of a rival directory-enquiries service.

The launch could lead to a price war, with Royal Mail undercutting its rivals with a 40p flat charge for up to two enquiries. The move is the latest attempt by Allan Leighton, chairman of Royal Mail, to generate new sources of income for the indebted business.

The entry of Royal Mail into the £160m directory-enquiries market will be a blow for 118 118, The Number, which is reported to be working on plans to float this year.

Infonxx, the world’s largest provider of directory assistance services and The Number’s American parent company, has asked Goldman Sachs to prepare the business for a listing.

Backed by its iconic advertising campaign — which features two mustachioed 1970s runners/rehearsing actors — 118 118 has dominated the market despite charging premium rates.

Royal Mail’s service — 11 88 55 — will be run by the Post Office, a division of Royal Mail. Simon Carter, head of Post Office Home Phone, hopes to cash in on consumer dissatisfaction with current directory-enquiries services.

“Providing greater choice was meant to give a better deal, but people have been disappointed,” he said.

A survey by the Post Office has revealed that 40% of consumers are dissatisfied with current 118 services.

The move into directory enquiries increases the Post Office’s presence in the telecoms market after the launch of its Home Phone service earlier this year. According to Carter, Home Phone is currently signing up more than 4,000 customers a day to the fixed-line residential service.

Royal Mail has opened call centres in Glasgow and Birmingham to handle enquiries.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts