UPDATE 1-German regulator paves way for big hike in postal charges

(Adds share price, context)

BERLIN, April 18 (Reuters) - Germany’s Federal Network Agency has cleared the way for Deutsche Post to significantly increase the cost of sending letters after the company pledged to hire an extra 5,000 delivery workers.

Deutsche Post shares, which have already rallied by almost 30 percent this year in anticipation of higher letter prices, were up almost 1 percent by 0900 GMT.

The agency said that te company could increase prices by 10.63 percent from July 1. It is now up to Deutsche Post to determine how the increase will be allocated between various letter sizes, postcards and other services.

Deutsche Post delivers 59 million letters a day in Germany and has a market share of 62 percent. It last increased postage for a standard letter to 70 cents from 62 cents in 2016.

The agency said Deutsche Post had argued that higher letter charges were justified in part because it has pledged to hire more delivery workers, and the agency said it would check to make sure the recruitment really happened.

The company, which is partly state-owned, has enjoyed a boom in volumes thanks to the rapid growth in parcel shipments by online retailers such as and Zalando but price increases have not kept pace with its costs.

The group issued a profit warning for 2018 last June and started a restructuring programme at its Post - eCommerce - Parcel (PeP) division, including an early retirement programme, as well as splitting its post-and-parcel delivery division into a German and an international unit. (Reporting by Matthias Inverardi, Emma Thomasson, editing by Thomas Escritt)