Mediaservis: leading challenger to Czech Post
With the postal service market set to open up, Mediaservis is positioning itself to wrap up a bigger chunk of the mail delivery market. And more than just junk mail is at stake.
The Czech postal services market is the most open and developed within the Central and Eastern Europe (CEE) region, yet rivals of traditional public operators are awaiting full liberalization of the European Union postal market, says Jaroslav Aujezdský, CEO of Mediaservis, an alternative competitor to domestic state-run post office Èeská pošta (ÈP).
Europe’s postal market was supposed to be opened up to rivals as of 2009, but the European Parliament adopted a compromise solution July 11 that would allow EU member states to delay full liberalization until 2011 or 2013. The decision is expected in October. Countries including France, Italy, Spain, Greece, Belgium, Hungary and Poland fear that rapid liberalization could destroy their public operators, resulting in weaker customer service and significant job losses. Except for Sweden, Finland and the U.K., which are fully liberalized, national postal operators in the European Union currently have a monopoly on processing mail weighing less than 50 grams.
Mediaservis is closely monitoring the liberalization process and will be prepared to meet all the conditions when the market is fully liberalized, and be able to provide delivery of mail under 50 grams, or under Kè 18 (EUR 0.65) in the Czech Republic, Aujezdský said.
Currently, Mediaservis has about a 20 percent market share of approximately 1 billion addressed mail items including letters, direct mail, newspapers and magazines sent every year. “We want to enter the segment of delivery of letters under 50 grams, which represents about 65 percent of all the letters that we cannot deliver at the moment although we are capable of doing it,” Aujezdský said. The 65 percent represents mainly the business-to-business (B2B) and the business-to-customer (B2C) market. Some 90 percent of European mail is from businesses, and this is where most new rivals are likely to target new lower-priced services, according to the European
Commission (EC).
Mediaservis was established in 1999 with the aim of providing a morning delivery service mainly for publishing houses. At that time the only operator ÈP offered late morning delivery of periodicals on weekdays, and no service on Saturdays.
Mediaservis provided publishing houses with delivery by 7:30 a.m. Monday through Saturday. This enabled publishing houses to launch subscription marketing.
Aujezdský has been with Mediaservis, formerly called Pøedplatné tisku, from the very beginning after he left distribution company První novinová spoleènost (PNS). Pøedplatné tisku was set up in1999, and in May 2001 the logistics company
F-Log, a subsidiary of Germany’s Fiege group, gained a majority stake in the Czech company. The new owner changed the company’s name to Mediaservis but didn’t replace the management. “The majority owner brought neutrality, financial stability and know-how in the media and logistics sector, and in the future [will bring] know-how to the postal services sector,” Aujezdský said. In 2001, Mediaservis set a strategic goal of building up a network across the entire country, and achieved that goal in fall 2002. Since then, the firm handles morning delivery of newspaper and magazine subscriptions
to all Czech households from Monday to Saturday.
In 2003, Mediaservis entered another segment, direct mail delivery, and became the first alternative operator to ÈP in the Czech Republic. Direct mail includes addressed advertising material, such as catalogs.
In 2002, Mediaservis saw a 50 percent growth in its number of employees to 8,500 and since then the number has been more or less stable. Last year, the company for the first time topped Kè 1 billion in revenues, and this year it also expects to post revenues of more than Kè 1 billion. Postal services generate about 85 percent of the company’s revenues and the remaining part comes from telemarketing and customer service. In 2001, the firm’s Brno, South Moravia-based call center provided 55 operator seats, and currently it has about 250 operator seats. The center mainly provides active telemarketing services, with some clients outsourcing processing of customer service. The call center’s clients include some 150 publishing houses in the Czech Republic, but over the past five years it has gained companies such as Citibank, mobile operator T-Mobile Czech Republic, book publisher Knižní Klub, electronics retailer Electro World and insurer American International Group (AIG). The company’s telemarketing services grow by about 15 percent every year, Aujezdský said. Mediaservis is trying to connect the postal services and telemarketing segments by developing a network of courier delivery system.
After Mediaservis launched direct mail in 2003, ÈP— which was until then the only provider of the service—accused Mediaservis of breaching the postal law by entering its protected monopoly area. But the now-defunct Ministry of Informatics ruled in July 2004 that Mediaservis was able to provide direct mail services in the Czech Republic. The ruling proved that private companies can compete with the post office in direct mail, which represents about an 18 percent
share of the Czech postal market. Although the addressed direct-mail market is liberalized, private companies face unfair conditions because they must charge 19 percent value-added tax (VAT) on their services, while ÈP is exempt from charging VAT on similar services, Aujezdský said.
Mediaservis is at the same time monitoring the planned privatization of ÈP, which is interesting to potential investors for its branch network, as well as strategic partnership with banks and insurance companies (see story, page 10).
Mediaservis expects ÈP’s share to decrease by 20 percent three years after the postal market is fully liberalized because competition will become fiercer, Aujezdský said. “Our goal will be to offer clients interesting price benefits with the [same] quality the clients currently get,” he said, adding that the German postal market is 10 years ahead of the Czech Republic, which follows the development of the German postal market. After the market is fully liberalized, the market will grow, and the average prices for delivery will go down with new competition, Aujezdský said. Mail correspondence will again become a more advantageous form of communication with potential and existing customers.
“With full market opening, we can expect market saturation. The average price [will] decrease and the number of mail deliveries will increase. The Czech Republic is a small market and there will be up to two competitors to ÈP,” he said.
But in Germany, which is a much bigger country, there will be up to four big competitors to Deutsche Post. Compared to the current 1,200 firms in Germany offering some kind of postal delivery service, the Czech market is practically saturated with ÈP, Mediaservis and TNT Post ÈR. If more players wanted to compete with the three operators, they would have to be present here already, Aujezdský said. There are some attempts by companies that provide unaddressed business mail service, but everything depends on how the conditions for licensing will be specified, and how the companies prepare for the change. Companies that employ students and other temporary staff probably will not be able to meet the standards that clients expect in the fiercely competitive addressed direct mail industry, Aujezdský said. It’s difficult to imagine that after 160 years of the Czech postal service’s existence, there will be competition.
