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Index of Postal Freedom
Germany
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Overview
Deutsche Post -- under the umbrella name Deutsche Post World Net -- is the largest mail operator in Europe, delivering roughly 70 million pieces of mail six days a week in Germany. With close to 500,000 employees, it is also Germany’s largest employer. Its revenues totaled €60.5 billion ($80.65 billion) in 2006. Deutsche Post AG has also become the world's largest logistics company. Deutsche Post World Net is the public trade name of this international conglomerate headquartered in Bonn.
The German postal service is unique in being one of the first European services to be converted from a completely state-run organization into a semi-independent, semi-private business. Moreover, as early as the 1990s, Deutsche Post was the first “national” postal service to pursue an aggressive strategy of expansion and diversification beyond its home country.
The growth of Deutsche Post beyond Germany itself has been controversial. Some maintain that the company’s acquisitions and rapid worldwide expansion into the private sector have been paid for by its “trapped” residential mail customers within Germany. Although officially the policy of the European Union, full competition in the residential mail market has so far been opposed, delayed and otherwise thwarted by DP.
On top of this, DP also continues to receive state subsidies for delivering residential mail. Critics maintained that some portion of these state monies were diverted by DP into below-cost deals in business segments of its markets. In fact, substantial fines were levied on DP in 2002 by the European Commission when an investigation showed at least some of these allegations to be true.
Germany nominally opened its postal market to competition at the beginning of 2008. The DP and its labor unions opposed the move and have gone to great lengths to limit competition, emboldened by the reluctance of other European nations -- notably France -- to revoke their own domestic monopolies.
In November 2007, the German government instituted a minimum wage for letter carriers, with the support of both Deutsche Post and its unions. The minimum wage put competitors at a significant disadvantage by preventing them from paying lower wages, effectively re-granting a letter-delivery monopoly to Deutsche Post.
Competitors led by TNT of the Netherlands have challenged the law in German court, but for the time-being, this state-backed labor inflexibility has undermined the formal liberalization of the German postal market.
There is no doubt that the aggressive Deutsche Post will continue to be a major player in a broad range of world markets -- mail and package delivery, business logistics, banking, communications and finance. To this point, Deutsche Post has shrewdly grown by leveraging a huge domestic revenue base that few of its competitors -- private or national -- can match.
Liberalization and Privatization
Reform of the post-war German postal service in West Germany was already underway well before the reunification of the two Germanys in 1990. The postal system of West Germany was officially reunited with the virtually bankrupt East German system in 2000.
The postal service was split up in 1989 into three units, but the critical transition came in 1995 -- the so-called “second wave” of the orchestrated German liberalization policy -- when those three units were officially converted into private stock companies -- Deutsche Post AG (DP), Deutsche Postbank AG, and Deutsche Telekom AG (AG stands for “stock company” in German). A large block of DP shares were put on public exchanges in November of 2000.
The new “private” Deutsche Post began a whirlwind round of investments and acquisitions beyond German borders, seizing upon new business opportunities across Europe and beyond made possible by the evolving European Union.
In 1998, DP acquired Global Mail (USA) the largest and fastest growing private provider of mail services in the huge North American market. A Swiss logistics company, Danzas, was snapped up in 1999.
Although the traditional German postal bank had been split off from the postal service in 1989, the German government allowed Postbank AG to come back to Deutsche Post AG in 1999 as a subsidiary when Berlin sold its government shares of the bank (both giro money transfer service and the savings bank) to Deutsche Post AG.
Although DP officially went public in 2000, share stakes in the company were retained by various government bodies. As a semi-public, semi-private entity, DP acquired a 25% stake in DHL International Ltd., the worldwide market leader in international courier shipments.
In 2002, DP was granted a license to deliver mail in the United Kingdom, the first company to break the Royal Mail's long-standing monopoly. That same year DP took over 100% of DHL to consolidate its growth strategy in express delivery.
In a move aimed at breaking into the enormous American market dominated by Fedex and UPS, DP acquired the #3 American delivery company Airborne Express in 2003 and integrated it into DHL as DHL Express. DHL itself was rebranded as DHL Global Mail the following year, bringing a broad range of international mail services under integrated control.
DP then acquired a major British logistics and mail device provider Exel in 2005. Meanwhile, DP’s subsidiary Deutsche Postbank bought up BHW, a leading German home-finance specialist. DHL Global Mail UK merged with Mercury International in 2006.
With these and other whirlwind moves, the German “postal” service -- the largest mail operation in Europe -- was well on its way to becoming a major international transportation and communications conglomerate.
Ownership and Structure
Roughly 65% of DP shares are “free floating” shares, open to market fluctuations since November of 2000. Purely private investors own 8% of such shares. 57% are owned by a wide and complex array of “institutional investors” representing a mix of public and private organizations. The remaining 35% were sold off to the German government-owned development bank, the KfWor Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute) which dates back to the Marshall Plan after World War II. These latter shares are not on the market.
Deutsche Post World Net is the name under which the Group appears in public, e.g. in advertising. Deutsche Post AG is the legal name of the Group's parent company whose stock has been listed on all German stock exchanges since Nov. 20, 2000. Dividends on DP stock are tax free. Shares of Postbank were put on the market in a spectacular IPO in June of 2004.
Deutsche Post World Net operates through three brands -- DHL, Deutsche Post, and Postbank -- and five business divisions:
The mail division delivers approximately 70 million letters six days every week in Germany, and provides services across the entire mail value chain, including production facilities at central hubs, sales offices and production centers on four continents, as well as direct connections to more than 200 countries.
The express division -- under the DHL brand -- transports courier, express and parcel shipments all over the world, combining air and ground transport.
The logistics division -- also operating primarily under DHL brands (DHL Global Forwarding and DHL Exel Supply Chain) -- provides a range of international logistics services via long-term contracts with major multinationals across a wide range of industrial sectors.
The financial services division, which maintains a retail bank network in Germany with roughly 14.5 million customers, operates through its Deutsche Postbank AG subsidiary
The services division includes the corporate center, global business services, and retail postal outlets.
Regulation and Universal Service
At the time of the first postal reform in 1989, the three units of the old Deutsche Post were overseen by a federal ministry -- the Bundesministerium für Post und Telekommunikation. However, that centralized ministry was dissolved in 1998 in favor of a more decentralized new federal “net” agency (Bundesnetzagentur) which reported to the ministry for economics and technology. Other secondary functions from the old regime were split to the federal ministry of finance and the federal ministry of the interior.
A new non-ministerial support institution -- Bundesanstalt für Post und Telekommunikation -- was also created which is responsible for diverse legal services as well as benefits for former postal civil servants.
Deutsche Post contracts with the government as the nation’s universal service provider.
According to the postal administration law (Postverwaltungsgesetz, abbreviated PostVwG), mail service is to be financially self-sufficient and to be administered in "the interests of the German national economy." However, DP receives state subsidies for residential mail, and the majority of its profits still come from domestic residential mail -- a huge market.
Mail Competition in Germany
There are already hundreds of commercial mail distributors in the country. German mail boxes are not the exclusive property of Deutsche Post. However, with minor and very complicated exceptions, DP retains a monopoly on the huge market for residential letters under 50 grams. This monopoly formally ended on Jan. 1, 2008, but actual competition has been slow to take root.
Express delivery and package markets are already open and significant competitors are poised to enter residential mail. These include the PIN Group and Dutch-owned TNT Post. Since DP intends to charge competitors to use its massive sorting and delivery system, the larger of the potential competitors are already setting up their own processing networks to avoid DP fees. However, as in the rest of Europe, new competitors in residential mail will likely go after only specific niches in the German market. As was the case with Swedish privatization, many expect that the cost of mailing a letter in Germany will drop significantly if full competition is allowed.
Futures and Outcomes
Deutsche Post has ambitious growth plans. It is already a major multinational conglomerate which intends to ride the wave of global economic expansion by building an efficient and interlocking worldwide web of transport and communications services. The company identifies and seeks ways to profit from major and emerging trade routes and modalities, bundling high-tech delivery, tracking and financial services to become a single source supplier with outstanding performance and competitive costs. With its branded DHL services, DP is aiming to crack the domestic American market as well as to continue to grow in Asia.
Nonetheless, the company’s success may ultimately hang on its roots in Germany. To date much of its resources -- and its profits -- still come from its monopoly on the German residential mail market. Germany has rightly been called the “bellwether” of postal liberalization in Europe. If the German government moves to open Germany to full competition and significantly lower prices in the old monopoly zones, then Deutsche Post may have to rethink its business model as it loses some of the advantages which underlie the company’s success in markets outside of Germany.
Useful Links
Deutsche Post Website
IRET Study on Minimum Wage in Germany's Postal Sector |
