£2.35m monitoring levy may add to An Post's financial woes

An Post faces a (pounds) 2.35 million (E2.98 million) levy to have
its postal business monitored by the telecommunications regulator
this year and next. The charge sought by the Director of Telecommunications Regulation,
Ms Etain Doyle, will increase financial pressure on the State
company, whose post office network is expected to lose (pounds) 1
million each month this year. After losses of about (pounds) 3 million on the post office network
in 2000, the company’s overall profit from day-to-day operations was
(pounds) 7.7 million. On Monday, the Government rejected its request for a subvention to
keep rural and urban post offices open. Instead, it told the company
to develop a new payment system for post offices. Postmasters will be offered a once-off severance payment to become
free agents, empowered to adopt new revenue streams for their
business. They will be paid a fee-per-transaction instead of a
retainer. If postmasters reject that option, the postal business will be
transferred to other retailers. An Post was also asked to use some of its (pounds) 167 million cash
reserves to support the business in the short term. The company
wants to invest this money in the profitable elements of its
business. Citing a likely loss on the post office network of (pounds) 79.2
million by 2005, its chief executive, Mr John Hynes, has described
that solution as akin to ‘putting the furniture in the fire’. Given the scale of the financial difficulty, senior figures within
the company are understood to regard a levy at the rates mooted by
Ms Doyle as ‘excessive’. According to a consultation paper she published last week, the
company can submit a response by August 17th. Besides saying An Post
would respond, a company spokeswoman declined to comment. The levy will pay for Ms Doyle’s regulation of An Post’s universal
post services, i.e. those it is obliged to offer throughout the
State. This includes postal business for letters and parcels up to
certain limits. The fee will be charged initially for Ms Doyle’s regulation in the
second half of this year. Citing the terms of the consultation
paper, one informed person said the charge would amount to (pounds)
600,000 for the July-December period. The levy next year will be calculated differently, and could reach
(pounds) 1.75 million for 2002. Ms Doyle’s office mainly regulates mobile and non-mobile telecoms.
Her office assumed regulation of the postal business last year. Ms
Doyle also sets postal rates. An Post has sought a rise in international postal rates from Ms
Doyle’s office, which is assessing its application. The company has said it will seek a rise in domestic postal rates
when that process is completed. It is not known what increase An Post wants to secure. However, its
profit margins are poor and it has made no secret that returns from
its core business are increasingly inadequate. The company has said cost increases that outstrip revenue growth
cannot be sustained. It has been sanctioned to seek a strategic alliance – most likely
with Deutsche Post or the Dutch operator TNT Post Group – but
accepts that will not happen until its funding difficulties are
resolved.
Copyright 2001 Irish Times.
Source: World Reporter (Trade Mark) – FT McCarthy.THE IRISH TIMES, 01st August 2001