Report highlights La Poste need to increase investments
La Poste needs to raise at least €2.7 billion as part of planned total investments of up to €9 billion during 2009-2012, according to a French government-commissioned report.
As reported by French media last week, the Ailleret commission concluded that the postal group needed substantial external financing in order to be able to make necessary investment in mail modernisation, network expansion and express/parcels acquisitions during the next four years.
Faced with the challenges from electronic substitution of mail volumes and full European postal liberalisation in 2011, the postal operator had to grow by expanding its offers and its European presence. The status quo is “inacceptable”, it said.
But the commission effectively killed off La Poste’s ambition of a share placement in 2010 or 2011. “In the context of the financial crisis, the hypothesis of an appeal to private investors is neither desirable nor credible,” the commission stated. “Privatisation is excluded,” it declared.
Instead, La Poste should remain 100% state-owned but its capital could be opened to publicly-owned financial investors such as the Caisse des depots et consignations (CDC). The commission supported the legal transformation of La Poste into a limited company in order to facilitate the capital investment.
Detailing La Poste’s investment plans for 2009-2012, the commission reported that the postal operator planned to spend €2.25-2.5 billion on its mail operations, between €1.7 billion and €1.85 billion in expanding its express/parcels activities, €1.4 billion in the post office network and €1-2 billion to grow its financial business La Banque Postale.
The commission said that La Poste would certainly have to invest at least €6.3 billion out of these spending plans, which ranged from a total of €7.35 billion to €9 billion. Based on expectations that the postal operator would only be able to finance €3.6 billion out of its own funds, a further €2.7 billion at least would therefore be needed, it said.
In view of debts of about €6 billion as of end-2008, the option of further debts should be excluded, the commission said. It also rejected the option of scaling back the planned investments since this would inevitably mean La Poste would decline and lose market share in the future.
The express/parcels sector is a “major growth factor” for La Poste and its “principal mode of internationalisation”, the commission pointed out. La Poste should aim to become a European market leader and have the “financial capacity” to grow its presence, it said. Its European network is not yet fully consolidated, the commission noted.
Expansion in fast-growing markets outside Europe is “an opportunity” requiring
in-depth examination on a case-by-case basis, it added. The successful policy of international alliances should be continued, it recommended.
La Poste has estimated it requires between €1.1 billion and €1.25 billion for express/parcels growth during 2009-2012, with the bulk for acquisitions in Europe, the commission stated. A further €600 million is planned for the domestic French network, mostly for the ColiPoste B2C business.
Addressing the group’s international postal expansion plans, the report said
La Poste wants to invest €500 – 800 million during 2009-2012 in cross-border mail, “cooperation opportunities” with other postal operators and building up a European mail network. But La Poste should be “ cautious” on this front due to various risks, the commission said.
The French prime minister François Fillon, whose office published the full report, issued a statement saying that he would consider the commission’s findings and make recommendations to French president Nicolas Sarkozy “in the near future”. The government wanted “to give La Poste all the necessary means and tools for its development” while maintaining its “public character”, the rights and status of employees, and its “public service missions”.
