SingPost says it's ready for expiry of its 15-year monopoly on basic mail services
Singapore's postal sector will be fully liberalised on April 1 this year. Basic domestic and international mail services – including collection and delivery of letters and postcards – will be opened to competition, after the 15-year monopoly of Singapore Post (SingPost) expires at the end of March.
The government said yesterday that the move – which was widely anticipated – could save businesses $8 million to $25 million a year over the next two to three years. Business mail makes up 95 per cent of total domestic mail.
Singapore's postal services sector generated annual revenue of more than $1 billion – including $200 million from basic mail services – in 2004, according to the latest figures. Mail volume has been growing about 2 per cent per year in recent years.
'We're aware of the slow growth of the sector but we're optimistic that with further liberalisation, we can introduce competition which will benefit customers. There are small but not insignificant cost savings,' Minister for Information, Communication and the Arts Lee Boon Yang said at a news briefing yesterday. 'The whole thrust of this is to help businesses reduce cost.'
'We have received indications from postal services providers that they have an interest in entering the basic services market,' said Dr Lee. 'The intention is not to have a pre-determined number of operators.'
The potential impact on the earnings of SingPost is not expected to be of major concern – the group has been preparing for the loss of its monopoly by diversifying into non-postal services such as loans and pawnbroking.
'We respect the ministry's decision to liberalise the basic mail services market,' SingPost said in a statement yesterday evening. 'We are ready for it and we will continue to provide our customers with the highest standard of mail service that they have come to enjoy and at the most competitive rates.'
The government's decision to open up basic mail services follows public consultation in August 2006 by the Infocomm Development Authority of Singapore (IDA).
Under the new framework, basic mail services including inbound and outbound international mail will be opened to competition. The licensing regime covers addressed letters and express letters weighing 500g and below. Postal services involving other items – such as parcels, books and catalogues – will be classified as non-licensed services.
There will be two types of licensed providers. Public postal licensees (PPLs) will have a 15-year licence and universal service obligations, such as providing island-wide letter collection and delivery, maintaining a minimum number of post boxes and post offices for consumers' easy access and offering service quality according to standards set by IDA. All others will be designated postal services operators (PSOs), with 10-year licences.
While there can be more than one PPL, IDA said that SingPost will be the designated PPL. As such, only SingPost will hold the full set of letterbox master-door keys – to ensure mail integrity and emergency preparedness of the postal system. SingPost will also have the right to issue national stamps and to maintain Singapore's postal code system. Other providers will be allowed to issue stamps, but these will not bear the word 'Singapore'.
Given that it will hold the letterbox master-door keys, SingPost will be required to provide access to its delivery network to its competitors at a reasonable price, just as Singapore Telecom had to for the liberalisation of the telecoms sector, said IDA CEO Chan Yeng Kit. 'Access to SingPost's delivery infrastructure will be something we will regulate. We will ensure there will be access.'
As for collection centres, Mr Chan said there is room for service providers to tap non-postal networks, such as petrol stations.
Analysts have pointed out that SingPost's penetration – 95 per cent of the domestic market – and established infrastructure could deter potential new entrants to the basic mail services sector.
'SingPost is well-positioned to weather the deregulation as it has managed to reduce its dependence on basic mail services. Furthermore, its extensive network and proven infrastructure are key barriers to entry,' Kim Eng Research said in a note last week.
SingPost does not provide figures for basic mail services in its financial results. But total mail services accounted for 77 per cent of its revenue of $223.4 million and operating profit of $127 million for the first nine months of 2006. According to some estimates, about 60 per cent of SingPost's domestic mail volume comprises items that are not covered by the basic mail licence and where the market is already fully competitive.
SingPost, which was listed in 2003, is still 25 per cent owned by Singapore Telecom.
The government will conduct further public consultation in the first quarter of this year to seek more feedback on details of the regulatory, licensing and competition frameworks and code for basic mail services.
