Opening of EU mail markets to raise competitive pressure on postal companies -S&P

Standard & Poor’s Ratings Services said the opening of the EU’s 90 bln eur mail markets to full competition from 2011 will raise the competitive pressure on the four large European postal companies, Deutsche Post AG, rated ‘A-‘ with a negative outlook, TNT NV, rated ‘BBB+’, La Poste, rated ‘AA-‘ and Italy’s Poste Italiane Group, rated ‘A’, with stable outlooks.
S&P said the slow pace of liberalisation over a 15-year period has also offered a strong competitive advantage to these incumbent national mail services. This has given the companies the chance to reposition themselves in more lucrative segments of the mail market and expand into non-mail activities like international express and logistics and financial services.
Deutsche Post and TNT are likely to be key players in sector consolidation, and their ratings will continue to benefit from their strongly cash-generative mail segments, the agency added.
S&P said state-owned La Poste will also benefit from the slow pace of full liberalisation of its home market, which gives it more time to streamline and modernize its mail operations, leverage its costly network with its enlarged banking offer, and eventually match competitors’ efficiency and profitability.
While, Poste Italiane, although also not privatised, may be in a stronger position because its financial services contribute a strong 67 pct of its total sales, compared with 22 pct for La Poste, the agency said.
All four players may also face regulation risks because the European Commission liberalisation plan still upholds the controversial ‘universal service obligation on incumbent national postal services, obliging them to continue to provide full territorial collection and delivery at least five days a week at an affordable cost, S&P added. Standard & Poor’s Ratings Services said the opening of the EU’s 90 bln eur mail markets to full competition from 2011 will raise the competitive pressure on the four large European postal companies, Deutsche Post AG, rated ‘A-‘ with a negative outlook, TNT NV, rated ‘BBB+’, La Poste, rated ‘AA-‘ and Italy’s Poste Italiane Group, rated ‘A’, with stable outlooks.
S&P said the slow pace of liberalisation over a 15-year period has also offered a strong competitive advantage to these incumbent national mail services. This has given the companies the chance to reposition themselves in more lucrative segments of the mail market and expand into non-mail activities like international express and logistics and financial services.
Deutsche Post and TNT are likely to be key players in sector consolidation, and their ratings will continue to benefit from their strongly cash-generative mail segments, the agency added.
S&P said state-owned La Poste will also benefit from the slow pace of full liberalisation of its home market, which gives it more time to streamline and modernize its mail operations, leverage its costly network with its enlarged banking offer, and eventually match competitors’ efficiency and profitability.
While, Poste Italiane, although also not privatised, may be in a stronger position because its financial services contribute a strong 67 pct of its total sales, compared with 22 pct for La Poste, the agency said.
All four players may also face regulation risks because the European Commission liberalisation plan still upholds the controversial ‘universal service obligation on incumbent national postal services, obliging them to continue to provide full territorial collection and delivery at least five days a week at an affordable cost, S&P added.