Deutsche Post Backpedals
After threatening to cut 10,000 jobs and close post offices across Germany, Deutsche Post AG seems to have reconsidered its response to the regulator’s demand for a cut in postage prices.
Deutsche Post chief executive Klaus Zumwinkel said that after “careful discussions” with Economics Minister Werner Müller his company would take appropriate account of the different interests of consumers, shareholders and employees.
On Tuesday evening, the RTP telecoms and postal services regulatory body ordered Deutsche Post to cut the postage on standard letters and postcards by 4.7%. The postal giant – still 69%-owned by the government – responded by saying it would have to consider cutting 10,000 jobs and closing 1,000 post offices nationwide in anticipation of the loss of 1.5 billion euros in earnings by 2007.
Müller said he considered Deutsche Post’s reaction “inappropriate”. The effects of the cut in postage would be unpleasant for Deutsche Post “but in the interest of consumers certain losses would have to be tolerated”, the minister said.
A spokesman for the RTP dimissed outright suggestions that it had taken its decision under political pressure. It said it had to revise the prices charged by the letter-delivery monopolist because the old guidelines were due to run out at the end of this year.
The RTP had already attempted a few years ago to force Deutsche Post to cut its letter-delivery rates. But at the time, shortly before the postal giant was floated, Müller prevented the increase by issuing a highly controversial directive.
Anaylsts said that Wednesday’s news had not come as a surprise, but it was Deutsche Post’s shareholders who now had to foot the bill. Klaus Linde, analyst at SES Research, reduced his share price target for Deutsche Post from 19 to 17 euros, but he upheld his rating of outperformer. Oliver Graf Wrangel at Merck Finck & Co. reduced his rating to marketperformer from outperformer, pointing to the expected 1.5 billion loss in earnings by 2007.
Shares in Deutsche Post fell to a new all-time low of 11.70 euros intraday Thursday before rallying to close at 12.08 euros, down just 0.17%
