Regulator confirms price cuts in postal service that Deutsche Post warns could cost thousands of jobs
German regulators said Monday they will go ahead with price cuts in the postal service that Deutsche Post says may force it to cut 10,000 jobs and shutter 1,000 post offices.
Post and telecoms regulator RegTP confirmed the plans after allowing a little more than two weeks for consultations with affected parties. The price cap covers the period running up to the end of Deutsche Post’s monopoly on letter delivery in 2007.
Deutsche Post declined to comment on the decision ahead of a news conference Wednesday, when it will present its first-half earnings. But chief executive Klaus Zumwinkel warned earlier this month that the price curbs could spark drastic cuts elsewhere.
Under the new regulations, postage on letters and postcards would fall by an average 4.7 percent from Jan. 1. The details are up to the company. For 2004 to 2007, RegTP has drawn up a new formula linked to inflation in Germany and productivity gains at the postal service.
Deutsche Post would then only be allowed to raise its prices for mail items if inflation exceeds 1.8 percent. Lower inflation would prompt lower prices.
Zumwinkel warned that the regulations will slash 1.5 billion euros (dlrs 1.5 million) from its profits over the next five years, forcing it to consider up to 10,000 job cuts, or roughly 3 percent of its work force.
The company, which said it may also remove thousands of mailboxes, said the price-cap would cloud its ability to pay dividends and could hurt prospects for the German government to sell more of its stock.
The government sold 29 percent of Deutsche Post in 2000 but has put off selling a majority stake after stock markets slid.
