TNT faces uncertainty as liberalisation vote is delayed again

Dutch postal giant TNT NV is facing continued uncertainty regarding domestic operations after a parliamentary vote on a liberalisation law that would open the market to more competition was again delayed yesterday, analysts said.

The law, meant to break the once state-owned TNT's monopoly on letters weighing up to 50 grams, is meant to take effect from January 1.

It will allow competitors like Sandd and Deutsche Post's Selekt Mail to expand their market share in the Netherlands and increase domestic competition.

But the legislation has proven politically divisive and the vote, already pushed back from Tuesday to Thursday, has now been postponed for three weeks.

A spokesman at the Ministry of Economic Affairs said the vote was delayed so that the deputy minister in charge of liberalisation can study a series of last-minute changes suggested by MPs.

Suggested amendments include stamp price regulation without the established minimum price the government had suggested in lieu of a margin cap on aspects of the market in which TNT is unlikely to face competition.

Other suggested amendments involve the requirement that TNT provide downstream access to some of its network and a clause forcing competitors to pay their employees according to a general workers' agreement instead of the per-delivery rates they pay now.
The last demand has been backed by TNT Post and unions representing its workers.

Claiming that the payment schemes used by Sandd and Selekt Mail lead to unfair competition that will cost TNT workers their jobs, the TNT Post works council said earlier this week that protests, including efforts to obstruct work for Selekt Mail and Sandd, are a possibility.

Kempen & Co analyst Oskar Thijs told Thomson Financial News that the stamp price issue can 'theoretically' pose a risk to TNT, but said in a note to clients that he thinks lowered prices are unlikely.

He doubts that TNT's competitors would be interested in downstream access to the market leader's network and thinks it unlikely that the salary provisions would garner majority support.

Thijs said he is cautiously optimistic about the long-term impact of the liberalisation on TNT, especially since an earlier attempt to create a margin cap was abandoned.

In the short term, however, he said the delayed vote could 'create uncertainty' and have a negative impact on TNT's share price.

Thijs rates the share 'buy' with a 40 eur price target.
Rabo Securities analysts Philip Scholte and Ralf Jacobs, who have been largely pessimistic about the effect liberalisation will have on TNT, said in a note to clients today that the delay 'may be slightly positive for TNT.'

But the Rabo analysts added that they maintain their view that 'full liberalisation will take place per January 2008' and Scholte stressed in a phone interview with Thomson Financial News that Rabo Securities still sees liberalisation posing a danger to TNT.

'If it goes through and the smaller companies come on the market, there will be a price war that could hurt TNT more than people realise,' the analyst said.

Rabo Securities has TNT shares at 'reduce' with a a 30.75 eur price target.

SNS Securities analyst Danny van Doesburg said in a preview note today that the opening of the market 'is one of the main issues this year.'

Noting provision included in the liberalisation legislation allowing the Netherlands to put the brakes on the liberalisation process if Germany does not follow through with the opening of its own market, Van Doesburg said that liberalisation will not necessarily hurt TNT.

'If there's a level playing field, the effects should be moderate,' he said, explaining that TNT could make up profits lost to domestic competition in new markets abroad even while he said 'the Dutch market will always be valuable for TNT.'

'It's an opportunity,' he added.

Van Doesburg holds TNT at 'add' with a 39 eur price target.