Deutsche Post concerns over jobs and profits

Deutsche Post said yesterday that the German regulator’s demand that it cut charges could cut annual profits by {XEU}300m ($296m) over the next five years and lead to the loss of 10,000 jobs.

The decision by RegTP, the German telecommunications and postal regulator, follows a recent order from the European Commission that Deutsche Post repay {XEU}572m in state funding for unfairly subsidising some of its loss-making businesses.

It will also add pressure on the company to diversify and boost its activities in express and logistics services. Deutsche Post still generates about 75 per cent of its profits from monopoly mail services,

“The decision by the RegTP is incomprehensible from an economic point of view,” said Deutsche Post, which claims its prices are in line with those of competitors.

Deutsche Post said the decision would force it to lower operational expenses. It threatened to cut 10,000 jobs in its mail division, close post offices or raise prices for other non-regulated services.

Deutsche Post’s warning of possible job losses comes at a sensitive political time three months before general elections, where the high unemployment is a key issue.

The government still owns 69 per cent of Deutsche Post.

RegTP, an independent institution, will ask Deutsche Post to lower charges for some standard letters and other products by an average of about 7 per cent to boost competition and ultimately save consumers {XEU}300m.

The exact price decreases are based on a basket that takes into account inflation rates, Deutsche Post’s profitability and prices in other countries.

Deutsche Post said the regulator’s plan would lower its profits by {XEU}300m in 2003 and by a total of {XEU}1.5bn between 2003 and 2007.

This comes on top of a {XEU}850m provision, about one-third of its operating profit, Deutsche Post will take for the fine earlier imposed by the Commission. www.ft.com/lex Copyright Financial Times Limited 2002. All Rights Reserved.

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