A long and stony road to European postal competition
Effective competition in European domestic mail markets is still a distant prospect, according to managers and experts at two recent major industry conferences. Market entry barriers and operating difficulties are holding back private competitors to national postal operators ahead of full EU mail liberalisation.
Following full liberalisation in four European countries (UK, Germany, Sweden and Finland), about 54 pct of the total EU mail market in volume terms is now completely open to competition, Alex Dieke, head of Postal Services and Logistics for German-based market research institute wik-Consult, told last month’s World Mail & Express Europe conference in Budapest organised by Triangle Management Services. But experience from these four liberalised markets showed that “it will take a long time for effective competition to arrive”, he commented. In the long-term, competitors might be able to gain up to 20-25 pct of larger markets, he forecast.
In Britain, which liberalised in 2006, competitors such as UK Mail and TNT Post had gained a 10 pct market share in terms of “upstream” volumes collected from customers but there was still no major competitor to Royal Mile for “last-mile” deliveries to businesses and consumers, Dieke said. In Sweden, where the market was opened in 1993, competitor CityMail still only had about 10 pct of the market. In Finland, which liberalised in 1997, high entry barriers meant there was no real competitor to Itella. In the Netherlands, which along with Slovakia might open its market before the official EU-wide liberalisation date of January 2011, competitors Selektmail and Sandd had gained 12 pct of the market despite TNT’s remaining monopoly, he noted.
“How long do postal operators need?”
Iain McLure, CEO of Spring Global Mail, criticised European postal operators for the repeated delays to liberalisation in recent years. “How long does the postal sector need to get prepared for competition?” he asked. In future, postal operators would have to focus on offering products in line with customer demand, better customer service and opportunities to achieve cost savings, the experienced postal manger forecast.
Spring, the TNT/Royal Mail/Singapore Post subsidiary, regularly used alternatives to national postal operators in some markets in order to provide quality services and lower costs, McLure pointed out. But he stressed: “As a broker, we are more of a customer (to postal operators) than a competitor.” Spring had been profitable for the past eight years, he noted.
Focus on customers
Ulrich Gygi, Swiss Post CEO, said the company’s monopoly would be reduced to letters up to 50g in April 2009 and was likely to be fully abolished by 2012. Outlining the Swiss Post strategy, he said it would aim to maintain a strong domestic position, focus more on customer segmentation, diversify its mail services and further develop its international business, Swiss Post International, as a sales & marketing business but without its own global network. In the international CEP market, Swiss Post would continue to operate through partners (TNT and GLS).
Magyar Posta, the Hungarian postal operator, aims to modernise its operations and become more profitable ready for liberalisation in 2013, said chairman György Csáki. The company has been profitable since 2003 but its profits have stagnated at the EUR 20 million – EUR 30 million level since 2005 and it has been held back politically from restructuring its postal network, he pointed out.
Minimum wage dominates German postal sector
Meanwhile, the dispute over the postal minimum wage and the latest market trends were the major topics at the major annual German industry event, the KEP-Kongress, held in Bonn last month. The event, organised by the Deutsche Verkehrs-Zeitung, attracted senior postal, express and parcel company managers.
The German postal market has been effectively stagnating with total revenues of about EUR 10 billion since 1998, Peter Quander, head of postal affairs at the German regulator Bundesnetzagentur, said in a presentation on German mail market trends. In 2007, Deutsche Post had an 87 pct German market share with mail revenues of EUR 8,787 million while competitors had a 13 pct share, he said. The market share of new entrants was similar to that of competitors in markets such as Britain, Netherlands and Sweden, he pointed out. Due to the minimum postal wage’s impact on delivery staff costs, competitors could start to act more as consolidators in future and hand over their volumes to Deutsche Post for final delivery, Quander predicted.
The event, however, was dominated by a head-to-head debate on the minimum postal wage between Wolfhard Bender, president of the Deutsche Post-dominated German Postal Employers Association, and Florian Gerster, president of the rival employers association founded by TNT Post and PIN Group.
Bender stressed the need for all postal companies to pay fair wages, and rejected claims that the association’s minimum wage agreement with the Verdi union had been designed to drive up the operating costs of the new market entrants. In response, Gerster claimed that Deutsche Post had aimed to prevent effective competition by forcing through a minimum wage for the whole sector, criticised Deutsche Post’s continued VAT exemption, and called on the Bundesnetzagentur to regulate Deutsche Post’s “dumping prices”.
