Deutsche Post unlikely to raise postal rates in 2012

Deutsche Post looks set to maintain domestic postal rates in Germany at current levels next year, following proposals by the country’s postal regulator to set a tight price cap for 2012. Germany’s price cap for universal postal services provided by Deutsche Post is based on the current rate of inflation and a measure of the company’s productivity growth, which reflects rising costs of service provision.

Yesterday saw Germany’s Federal Network Agency (FNA) – the Bundesnetzagentur – announcing that for the next two years, it will set the productivity factor at just 0.6, a big drop from the previous 1.8%.

The Agency conceded that its decision would give Deutsche Post only “moderate scope” to increase prices, but added that whether it was enough room for the company to raise prices was for Deutsche Post to decide.

The decision is provisional and subject to consultation, which the FNA suggested could influence the final outcome.

The FNA insisted its decision would give Deutsche Post incentive to maintain high levels of performance for its customers, and ensure that monopoly areas of the business do not cross-subsidise competitive areas like parcels.

Matthias Kurth, president of the FNA, confirmed that the decision would be the basis for setting postal rates for the next two years. He said: “The current draft allows Deutsche Post AG to maintain high quality standards at affordable prices.”

Kurth added that changing the review of the price cap mechanism to two years ahead, rather than the previous four-year gap, would be sufficient to guard against potential changes in the postal market.

Deutsche Post

Deutsche Post’s spokesman Dirk Klasen told the German media yesterday that his company would not apply for a price increase, since the new price cap did not allow sufficient price movement to justify printing new stamps and adjusting postage machines to cope.

He also suggested that at this stage, it was too late for Deutsche Post’s major customers to adjust their 2012 budgets.

Deutsche Post has not raised standard postage rates for 14 years, even cutting rates in 2003, while it said its “labour intensive” costs have risen and volumes declined.

Commenting on the FNA’s decision regarding the price cap, he said: “This is unjustified, because our productivity is already stretched to the limit.”

Private sector

Germany’s private sector trade association, the Federation of Postal, Courier and Express services (BdKEP) said today that the FNA’s decision was a “positive” move for the industry.

In a statement, the group said: “Last year Deutsche Post approached major customers with particularly low prices, forcing many of its competitors to cut their prices below cost. The BdKEP urges the Federal Network Agency to pay more attention to ensure that no cross-subsidisation occurs between letter and parcel services as well as between consumer and business customers.”

However, the trade group which had spoken out previously against significant increases in postal rates, said changing the review process would mean consumers facing the prospect of price increases in just two years’ time.