TPG announce their decision on the future of tariffs
The Dutch government’s decision to impose a tariff freeze has provoked a rapid and angry reaction from incumbent postal operator TNT Post Group, which so far has dominated the country’s postal market. But as the market heads for liberalization, TPG must clear this hurdle and sharpen its competitive edge.
The Ministry of Economic Affairs has set out the key components of its tariff regulation until 2007 in a letter to the Dutch parliament. Prices in the mandatory part of the mail business will be frozen until 2006, to be followed by full liberalisation of the postal system by 2007, provided Germany and Britain follow suit.
But the news has angered Dutch national carrier TPG. Although it supports the move to a fully liberalized market, it has condemned the decision to change the price control system as unbalanced. It argues that the existing system works well and results in exceptionally low tariffs for consumers that have actually gone down in recent years, while the intended price freeze will stifle the company’s entrepreneurial freedom.
According to TPG’s CEO, Peter Bakker, the plan will cost the company around E150 million in sales in the years to 2006 and will undermine fair competition. TPG perceives the Dutch government’s decision as way to punish its impressive profits, but the company insists the profits flow from its success and competitive spirit, which have made it the most efficient postal operator in Europe.
On the other hand, Dutch postal and telecom regulator Opta, which helped draw up the plan, denies that the rate freeze would hurt TPG. It suggests that the price freeze, far from harming TPG, will allow it to further extend its competitive position in the free sector of the postal market, making it even more important to have an agreement on cross-subsidies.
No matter how vehement its protestations, if prices stay fixed TPG will be forced to find new ways to maintain profitability and keep smiling customers. Its past success and forward looking attitude suggest that the company will handle the situation with aplomb.
