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)