Index of Postal Freedom Switzerland (Click here for a printer-friendly version) Overview Swiss Post traces its lineage to 1849, when “Federal Mail” -- the modern-day post’s precursor -- launched. Today, Swiss Post delivers mail and provides both financial services and passenger transport to Switzerland’s nearly eight million inhabitants. History The Universal Postal Union (UPU) was founded in Switzerland in 1874, so actors in the Swiss postal marketplace have long been aware of postal developments around the world. The UPU established the first Universal Postal Convention which sought to “simplify and coordinate the inter-state mailing of letters and parcels and regulates international cooperation between the postal authorities of the member states.” The UPU, now a part of the UN, still maintains its headquarters in Berne. Internally, the evolution of the Swiss postal system follows European patterns. In the 1920s, the country’s postal, telegraph, and telephone services were consolidated into a single federally-operated unit -- the Swiss PTT -- which continued until it was restructured first in 1960 and again in 1970.  Structure On January 1, 1998 -- the yellow-branded PTT was transformed into two public service companies -- Swiss Post and Swisscom. Swiss Post remained entirely government-owned. Swisscom was created as a new “semi-liberated” stock company in which the Swiss government continued to hold 52 percent of shares. The intention was to give Swisscom the freedom to maneuver and compete in newly liberalized telecommunications markets throughout Europe and the world. Despite the success of private Swiss multinationals, postal ventures beyond Swiss borders by both Swisscom and Swiss Post remain controversial. Observers remember the 2001 bankruptcy of national airline Swissair, which collapsed after risky leveraged acquisitions and mergers with other airlines. The so-called “Swissair disaster” even resulted in a 2007 criminal trial for the policy makers and directors involved and galvanized opposition against “adventures” abroad, at least by quasi-government entities. Like other posts worldwide, Swiss Post faces existential challenges in the near term. Not only must the organization deal with electronic diversion -- it also operates in a small domestic market that is smaller than those of its potential European competitors. With margins shrinking and costs rising, Swiss Post projects that its core business -- traditional mail -- will decline by one-third by 2015. Swiss Post has introduced several new products in hopes of generating the revenue it’s losing from electronic diversion. Perhaps the most innovative of these is the hybrid mail product Swiss Post Box, which allows customers to receive by email scanned images of their paper mail. They can then decide whether to have Swiss Post open a letter, scan the contents, and email them; to have the letter destroyed; or to have it physically sent to another address. Many postal industry observers believe this hybrid approach represents an important model for the future of mail around the world. Swiss Post Box is just one of the organization’s “ePost Solutions,” which also include secure identification on the Internet, legally compliant electronic signatures, and verified electronic mail. Swiss Post’s identify verification system “Post SuisseID” is delivered through USB sticks, which the post brands as “SwissStick,” or chip cards. The post also offers money transfers and bill payment, ATMs, automated postal services, e-tracking, and even passenger transport through its PostBus service. Swiss Post is organized as a Group with units, support units, and legally autonomous subsidiaries. Primary Group units are PostMail, Post Offices & Sales , PostFinance, Swiss Post International, PostLogistics, PostBus and Swiss Post Solutions. Operationally, Swiss Post Group defines its markets as: 1) Communications, which includes letters, newspapers, promotional mailings, information solutions, and data management in Switzerland, neighboring countries, and internationally. 2) Retail finance, including payments, investments, retirement planning and some financing. 3) Logistics, covering parcels, express services, and logistics solutions. 4) Public passenger transport, including regional, municipal, and urban transport plus systems management. Liberalization & Privatization Swiss Post retains a monopoly on the delivery of letters weighing less than 50 grams. In 2006, the reserve area was lowered from 350 grams to 100 grams. The current monopoly came into force in 2009. In December 2010, the Swiss parliament voted to begin reforming the country’s postal system. Switzerland’s Federal Council will evaluate the consequences of fully liberalizing the postal marketplace and will offer recommendations to parliament by 2014. In 2004, the parcel market in Switzerland was deregulated and made open to competition. Markets for parcels, express delivery, in-night express delivery, unaddressed mail, and newspaper deliver are all well developed. There are no initiatives pending to further privatize either Swiss Post or Swisscom.  Competition At least 27 companies have government approval to compete with Swiss Post in the liberalized portions of the postal marketplace. Swiss Post claims to generate 80 percent of its revenue in competitive markets. The remaining 20 percent comes from the monopoly area, which Swiss Post asserts is in competition with electronic media. However, Swiss Post’s share of outbound mail has been dropping due to vigorous competition from companies like Deutsche Post and G3 Worldwide. According to its 2010 annual report, Swiss Post holds 45 percent market share in the import and export of courier, express, and parcel services. Its logistics arm maintains 75 percent market share for parcels. Its lending business posts an 11.35-percent market share. And its regional transport segment has 16 percent of the market. Swiss Post has strong unions and a long tradition of union activism. Unions are regarded as “stakeholders” have a strong influence in all decisions relating to the mails. Universal Service Swiss Post is Switzerland’s universal service provider. Mail service must be provided on all working days -- a minimum of five days per week. “A POST” franked letters are delivered on Saturdays, whereas “B POST” mail is not. Despite the deregulation of the parcel market in 2004, Swiss Post continues to be the dominant provider in that market. The Swiss USO is stricter than in most other European countries and includes a variety of provisions which require extensive reporting, insure timely delivery, protect jobs, and prohibit outsourcing. Operating Statistics Despite a less-than-robust economic environment, Swiss Post Group generated a profit of CHF 910 million in 2010 -- CHF 182 million higher than the previous year. However, 61 percent of those profits came from SP’s retail banking operation, not from mail. Besides increased retail banking deposits, operating efficiencies and a higher volume of parcels contributed to the year’s profits. Swiss Post increased employment in its letter business by 326 full-time equivalents in 2010 to bring the total employment in mail operations to 45,129 full-time equivalents. Swiss Post is the country’s second-largest employer. Besides the lagging economy and the inexorable decline in letter volume, there were other pressures on Swiss Post’s profitability. In July 2009, the price of postage was reduced by the government. In 2010, Swiss Post earnings became subject to the value-added tax. That same year, Deutsche Post decided to use DHL, its own subsidiary, to transport parcels into Switzerland instead to subcontracting the business to Swiss Post. However, Swiss Post profits were sufficient for it to fund its own pensions with a CHF 100 million set-aside and to contribute CHF 200 million to the federal treasury. Letter volume declined 1.5 percent in 2010; Swiss Post delivered 2.365 billion address letters in 2010, down from 2.401 billion the year prior. Parcel count went from 104 million in 2009 to 108 million in 2010. PostMail operating income sank to CHF 2.619 billion in 2010 from CHF 2.808 billion in 2009. Also, the organization’s Post Offices & Sales unit (including sales of non-postal brand merchandise) booked a roughly CHF 100 million loss for the year. Switzerland has a dense network of over 2,500 post office branches, which have high costs. Retail finance offset the negatives. PostFinance had a net inflow of new money of CHF 10.662 billion in 2010, down from CHF 20.120 billion in 2009. For the first half of 2011, deposits were up 9.9 percent. Regulation The Swiss Postal Law of 1998 provides the legal framework for Swiss Post, including the process for liberalizing segments of the postal market, the rules for universal service and its financial support, and the scope of commercial activities Swiss Post is permitted to undertake. The law was completely revised in 2004 for implementation in 2006. It placed major limitations on Swiss Post in terms of financing and personnel decisions. Express mail and international parcels were excluded from the post’s monopoly. Moreover, the law stipulated that Swiss Post was to finance its universal service obligations from revenues derived from its monopoly activities. The law limited the reserve monopoly to just the size needed to guarantee universal service. A corporate-style governing board was set up by the law with the intent of encouraging a more “commercially oriented” organization. Swiss Post operates under significant capital restraints. It must go to the Swiss government, not private capital markets for investment capital. Pension funding is the subject of yearly negotiations between the post and the government. The obligation is burdensome because postal salaries in Switzerland are unusually generous -- approximately 30 percent above market. Moreover, Swiss Post is required to provide regular reports, certified by an independent auditor, of its computations of the cost of provided universal service. The law divides the Swiss postal market into two segments: universal services and competitive services. In the competitive area, licenses are required if private service operators provide regular, commercial delivery service of mail and parcels and reach revenue liable to value-added tax of at least CHF 100,000. The Postal Services Regulation Authority (PostReg) is a specialist independent authority attached to the Federal Department of the Environment, Transport, Energy and Communications. PostReg monitors the Swiss postal market to ensure that universal service is efficiently provided. PostReg deals with complaints made by the public related to universal services and is tasked with ensuring fair competition in the segments of the postal market that are open to it. The regulator also monitors compliance with standard-sector working conditions and enforces a ban on cross subsidies. PostReg is entitled to collect licensing fees up to 3 percent of a licensee’s turnover to compensate Swiss Post for its provision of universal service, if necessary. Pricing Swiss Post provides letter service with remarkable efficiency. Analysts of postal pricing say that Swiss Post’s domestic postage is relatively inexpensive. The post tabs itself as the sixth-cheapest provider of service among 15 “important” European countries. Swiss Post spokesmen say that if quality of service, higher Swiss salaries, and the strength of the Swiss franc were taken into account, the organization’s ranking would be even better. Future Foreign revenue from Swiss Post’s letter and package deliveries accounts for a fifth of revenue, CHF 1.8 billion. Swiss Post, like other postal services worldwide, is seeking to expand its operations outside of its base to compensate for declining domestic revenues. The company, according to its annual report, is already active in twenty countries, and the proportion of its employees dedicated to these activities is rising. Within the limits of guidelines allowed by the Swiss government, the post will no doubt continue to expand the reach of Swiss Post Solutions, the division which handles mail and document outsourcing for companies. Policy makers are also planning to expand PostFinance, SP’s banking arm, into corporate loans and even mortgages. Claude Béglé, the former head of Swiss Post, sees the country as a presumptive multinational conglomerate. “The Swiss Post must be like Nestlé,” he recently said. “It will in the future have a large headquarters in Switzerland, will develop products here, will pay taxes on its profits but to a large extent will do business outside the country.” Useful Links Swiss Post Website