The government has accepted an independent review into Royal Mail which recommended its part-sale to a foreign company.
Up to a third of the postal firm looks set to be sold off, with Dutch firm TNT having already expressed an interest.
Reacting to the report today, the Communication Workers Union (CWU) accused the government of initiating a privatisation agenda when it spoecifically promised not to do so in its election manifesto - a point made also by the Conservatives.
Announcing the decision to the Lords today, business secretary Lord Mandelson said the main threat to the institution lay in internet technology.
"Without far-reaching change, the opportunities brought by technology will become threats," he said.
Review author and ex-Ofcom deputy chairman Richard Hooper warned the firm would struggle to survive without forging strategic minority partnerships with foreign companies.
Lord Mandelson said the move would "protect the universal service for consumers, give Royal Mail new opportunities to develop [and] offer staff a future with more secure pension arrangements".
Liberal Democrat business spokesman John Thurso said the "status quo" was not an option.
"Royal Mail must be restructured if it is ever to return to profit," he added.
But the Conservatives claimed the government was planning to "snatch" Royal Mail's pension funds assets and assume its liability, effectively converting the pension scheme from a funded scheme into a pay-as-you-go scheme.
If true, it would net the government a £22 billion cash windfall but nationalise the pensions deficit, forcing taxpayers to foot the bill.
"The plan to introduce a new commercial partner is a step in the right direction, but must not distract attention from the real issue, which is the government's plan to raid Royal Mail's pension fund in order to plug a black hole in the public finances," said shadow business secretary Alan Duncan.
The government said it could only make Royal Mail attractive to a private company by guaranteeing the liability.
Royal Mail's pension fund has assets of £21.9 billion and liabilities of £25.3billion, giving a net deficit of £3.4billion.
The cost cutting programme implemented on mail services has already proved hugely political, with Post Office closures contested up and down the country by local MPs.