Green light for MaltaPost to raise postal rates

Regulators in Malta have approved a one-cent price increase for single piece domestic letters and the first adjustment to outbound international parcels for 14 years. But, the Malta Communications Authority turned down requests by MaltaPost to change prices for registered mail and bulk mail, and introduce new higher rates for domestic letters above 50g in weight.

The new tariffs come into force on 29 July 2011.

The Authority said today it would consider the rejected price proposals in a future price control mechanism.

Today’s decision, which followed a “thorough review” of MaltaPost’s cost accounting system, saw postal rate increases only granted when deemed justified, the Authority said.

The regulators decided that current tarrifs for bulk mail services were around the level of costs being incurred by MaltaPost, so did not approve a price increase.

For single piece letters, the Authority decided a slight increase in items up to 50g was warranted, putting the charge up to 20 cents, but the regulators refused a request to create new higher-price categories for heavier items that would have seen extra nine-cent charges for each additional 50g in weight beyond 150g.

The revision of foreign-bound parcels today was the first such change since 1997.

Customers have been paying “substantially” less to have parcels shipped abroad than the service costs MaltaPost, particularly with increased air transport costs and delivery charges from foreign postal operators.

Fees for priority parcels to the UK, for example, will now nearly double from EUR 12.51 for the first kilogram to EUR 23.04, with similar increases for sending to Germany.

Affordability

The Authority said in a statement today that it had considered the issue of public affordability of postal rates when making the decision on price increases.

But, it said the latest government figures suggested household spending on postal services remains low, around EUR 18 per household per year, compared to the year 2000 when the figure was EUR 26.

Assessing potential impacts on MaltaPost’s profitability, the regulators said it had every expectation that the Post’s finances would remain healthy.

“From a sustainability perspective, the MCA performed various simulations to gauge the expected impact on the overall profitability of MaltaPost’s regulated activity taking into consideration costs, efficiency levels and trends in postal volumes,” the Authority said. “This analysis concluded that the overall profits of the universal postal service are expected to remain healthy and fair.”

MaltaPost achieved a 1.4% year-on-year growth in revenue in the six months up to March 2011, to EUR 10.7m for the period, but a 9.3% drop in profits before tax to a EUR 1.7m income.

Revenues increased mainly from increased international mail volumes, but profits were hit by higher operating costs including mail service costs and utility bills, along with a decrease in traditional letter mail volumes.