Modernisation in Hungary
An Interview with Pal Szabo, CEO, Magyar Posta
World Mail Review May 2008 1. Give us a few facts and figures about your company–revenues, volume, profit, employees etc.
Magyar Posta runs over 2,700 post offices throughout Hungary and employs 37,000 people. Preliminary figures show that in 2007 profit before tax was HUF 5.6 billion, HUF 270 million up on 2006. Net sales revenue in 2007 reached HUF 181 billion, HUF 6.5 billion more than in the previous year.
2. How do you define your universal service obligation?
The law on the post in Hungary is one of the strictest in Europe. I would draw particular attention to the provisions on network operation, which state that Magyar Posta as the universal service provider must run a permanent post office in all villages with more than six hundred residents.The operation of an oversized network places a significant burden on Magyar Posta in preparing for the opening of the market.
Hungarian legislation also specifies the rules for collection and delivery, and the Post Act states that universal postal services must be of the same quality and offered at an affordable price for all users irrespective of geographical location.
3. What are the main developments in your marketplaces– mail, parcels and retail? What are the opportunities for growth and/or problems of decline in the various sectors? To what extent are your markets open to competition now? How will the recent agreement on full liberalisation for mail in the EU affect you?
Magyar Posta has no other option than to improve cost efficiency and minimise losses arising from running an oversized yet mandatory network, for instance by restructuring its operational network and reducing operational costs. We still need two or three years to effect these changes. As part of this process we closed a number of low turnover post offices last year, and at present about 1,100 post offices are being shared with other enterprises. Our aim is to operate more economically by 2009-10 through postal partnerships.
As well as restructuring the network, we are seeking to modernise our services with value for money products serving the real needs of customers. Our parcel portfolio has been revamped and new services offered. Thanks to this, we have managed to entice several large customers back to Magyar Posta. The logistics market is constantly expanding and Magyar Posta intends to develop further in this market.
In letter mail we have brought out new special and convenience services. It is fair to say that many big mailers in Hungary entrust their mail to Magyar Posta, but in order to retain these customers we had to act. That is why, for instance, we have devised a modern system of tariffs for them. The main task in strengthening the Company’s market position is to retain in the long term large customers posting even several million letters each month as well as to increase the sales of value added services, such as priority letters and registered letters.
Magyar Posta also sees good business opportunities in direct marketing. To exploit these, last year the Company sent a questionnaire to 3.6 million households of which over 400,000 were returned, giving Magyar Posta the biggest lifestyle database in Hungary. This year we plan to launch complex service packages on the DM market and to offer the fullest range possible of DM value chain elements to our customers. Apart from selling the database, Magyar Posta undertakes the personalisation, printing and delivery of DM letters, receives and processes replies, organises prize draws and, if required, despatches the goods.
As regards financial services, we intend to launch this year the “Post Retirement Account”, a new type of account developed especially for pensioners. Borrowing schemes are also expanding: we are introducing mortgage equity withdrawal and working on devising other loan products and their sale in the postal network.
4. Can you explain something about your ownership? Are there any plans for privatisation?
Magyar Posta is a fully state-owned company. The owner’s rights are exercised by the Hungarian National Asset Management Company, while the Ministry of Economics and Transport provides professional supervision. The owner is entitled to decide about any possible privatisation.
5. Do you have any alliances/joint ventures with private sector partners? Please tell us about them.
Magyar Posta is a minority owner of the Magyar Posta Insurance and Magyar Posta Life Insurance companies, created by Magyar Posta joining forces with Talanx AG. Talanx is the third largest insurance group in Germany, based in Hanover. It operates in 150 countries and employs oiver 8,500 people. Good quality, advantageous insurance products are now available almost everywhere in the country at over 2,700 post offices.
Magyar Posta also co-operates with Erste Bank as a strategic partner. Magyar Posta sells Erste Bank’s financial services via the postal network and also works together with the bank in developing its own financial services retailed under their own brand name.
6. Tell us something about your direct competition in mail and parcels.
The letter market will contract in the medium term and solutions replacing letters are to be expected. I have electronic bills or the further spread of arranging affairs electronically in mind, for example. Magyar Posta does not have any rivals covering the whole market, but competitors threatening parts of the market have appeared. The competitive situation is particularly strong in the distribution of advertising material.
Magyar Posta has strong rivals in the parcel and logistics markets. Besides big international firms offering logistics and express mail services, we have to compete with numerous Hungarian companies (large and small) that are trying to take submarkets from Magyar Posta.
7. How do you see the digital threat/opportunity? Does your organisation have products and services that clearly operate in the digital space?
Every postal service provider, and thus Magyar Posta too, must deal with the digital threat. Postal service providers must use opportunities offered by technological advance to develop their own services. Magyar Posta is doing this when, for example, it provides on-line tracking of different items for customers or sends a message by e-mail or SMS giving advice of the arrival of a letter.
8. Magyar Posta has been through a major and successful transformation programme. How did your employees and your customers respond?
Magyar Posta has undergone a major transformation in the last five years, including closing post offices and switching from rail entirely to road transport. Every major step was agreed beforehand with the organisations representing the employees’ interests, and forums were held in all corners of the country to ensure that our employees understood what we were doing and why, so they could identify with the changes. The programmes could not have been implemented without well prepared staff loyal to the Company.
Restructuring the network caused the greatest tension among customers, particularly people living in small communities. The tension was perceptible in spite of the fact that Magyar Posta conducted broad social communication to ensure that customers too understood the need for the changes. In the period since then, Magyar Posta has been proved right. Today even those who opposed the mobile post service when it was introduced now like, or at least accept, it.
9. How do you measure customer satisfaction?
The opinion of larger mailers is sought through personal interviews, whilst the general public is regularly surveyed, asking people’s opinion of postal services and Magyar Posta. This feedback, be it from our largest or smallest customer, is important to Magyar Posta in preparing for market liberalisation. In this research we also seek answers to questions such as what sort of new services customers would like to see at post offices.
10. Can you give us a couple of examples of real innovations in your organisation for the benefit of the customer?
The development of special electronic services for letters and parcels was a real innovation from Magyar Posta, well received by customers. For example, through E-notification we advise the sender about the delivery or non-delivery of items via text messages or e-mail. Through E-arrival at P.O.Box we advise the box holder via text message or e-mail about items in the P.O.Box on the day of arrival.
We are also proud that our modern banking and insurance services are present in communities where there is neither a bank nor a savings association. In villages like these the post office is the only place where customers can easily arrange their financial affairs.
11. Finally, as CEO, what gives you most pride in what you have achieved?
Everyone who works for Magyar Posta can be justly proud that five years ago we began the modernisation of the Company, steering it on a new course, and modernising services and the network. We have made the radical changes that other large Hungarian service providers and European posts have made in the last ten years and are now behind them. The results are tangible. We have significantly improved the quality of our services, shaped a modern network, and launched new services. The programme must be continued so that in the final analysis Magyar Posta can become an efficient, performance oriented, productive service provider functioning on a business basis and working with competent and motivated staff.
