An Post wins right for challenge on prices as it faces 70m loss

A REFUSAL to allow a 12c increase on the price of a stamp could lead to 70m losses for An Post in four years time, it has been claimed.

Communications Regulator ComReg’s block on a stamp price hike from 48c to 60c for a standard letter threatens the financial recovery of An Post, the High Court has heard.

An Post chief executive Donal Curtin claimed ComReg has put An Post “back on a financial knife edge in the immediate future”.

If An Post does not get an adequate price increase, it will lose at least 6m this year, break even next year, and losses will grow to 5m in 2008, 30m in 2009 and 70m in 2010, he said.

The High Court yesterday granted An Post leave to challenge the regulator’s decision.

ComReg has effectively imposed a price freeze on the obligatory and loss-making letter post service of An Post, a company which is at risk and whose entire recovery plan is dependent on a price increase, said Mr Curtin.

Much of the recovery plan, he added, was constrained by An Post’s legal obligations in relation to workers’ pay. The Labour Court had in November 2005 fixed the future wage costs of the company.

Increases

The refusal of the price increase also has “grave consequences” for the provision of postal services in the State, especially the standard letter post service, Mr Curtin said.

Although the intention of the relevant legislation was that charges for the letter service should be enough to cover costs, that was not the case, Mr Curtin said.

The continuing decline in the number of letters sent, due to technological advances, exacerbated the problem and ComReg had failed to take account of this.

An affidavit from Mr Curtin was presented yesterday to Mr Justice Micheal Peart by Gerard Hogan SC when counsel sought leave to take a legal challenge.

It is aimed at overturning ComReg’s decisions of December 20 last refusing a letter stamp price increase and imposing various conditions and discounts on any increases sanctioned for large packets and envelopes.

Mr Hogan said ComReg had failed to take into account An Post management’s view of the grave position the company would be in without letter price increases, and had instead sought to “micromanage” the company although it had no such power.

ComReg had failed to recognise that the postal sector is unique, among regulated utility services, in that demand for its core product is in fundamental decline.

In his affidavit, Mr Curtin said ComReg’s decisions failed to take into account the obligations on An Post, under the Postal and Telecommunications Services Act and under various EU Postal Services Directives, to ensure the company has sufficient revenue to enable it be properly financed and to avoid deficit financing.

A recovery plan was approved by the board and the Minister for Communications in 2003 to minimise losses. It involved major job losses with 600 jobs shed to date and increased revenue generation, including price increases.