International Postal Update — April 2008

LIBERALIZATION IN EUROPE STILL STOP AND GO

GERMAN RULINGS GIVE MIXED SIGNALS

Berlin court says the German postal minimum wage violates the German constitution. In an upset victory which will be appealed by Deutsche Post, Dutch mail competitor TNT won a ruling against being forced to pay a €9.80 hourly rate to workers in Germany. The minimum rate structure, worked out in a deal between the government and German postal unions last November, would have been a severe blow to all potential competitors to the dominant Deutsche Post. TNT spokesmen argued that the minimum wage should not be used to inhibit competition and protect a monopolist. Concessions enjoyed by Deutsche Post on VAT taxes remain an unresolved issue.

German postal unions threaten to strike over a work week extension. Deutsche Post workers’ hours are scheduled to be pushed up from the current 38.5 hours per week to 41 hours at the end of March. The German mail incumbent employs about 55,000 workers, and an extended work week would eliminate some 5,000 jobs, according to the unions.

Two major German postal competitors are facing trouble in the German market. It’s been reported that French mail incumbent La Poste may purchase the PIN group from publishing giant Axel Springer. PIN units are insolvent thanks to a stiff postal minimum wage of €8-9.80/hour — higher than the company’s planned €7.50/hour. PIN, which Springer had ramped up to 7,000 employees in anticipation of liberalization, is now closing offices and laying off workers. Meanwhile, Dutch postal unions are demanding a delay of the liberalization of their home market until they’re sure the Germans are not blocking Dutch competition from TNT Post in that market. The German market was liberalized on Jan. 1. TNT Post retains a monopoly on letters up to 50 grams through at least July 1.

U.K. POSTAL LIBERALIZATION CREATES JOBS

A recent study by Europe Economics shows competition has created 3,300 new jobs in the postal industry and boosted the U.K. economy by at least £229 million, a figure which may rise in coming years to £400 million. Although there are now 18 licensed operators in the U.K., the incumbent Royal Mail group still delivers over 99% of all mail. The research was commissioned by TNT, the leading competitor to Royal Mail. TNT says competition has benefited the U.K. by finally forcing the Royal Mail to modernize.

ITALIANS END LIBERALIZATION INVESTIGATION

Poste Italiane Group made concessions to the government’s anti-trust unit, which had claimed the entrenched incumbent was using its market position to stifle competition. Italy has been testing the waters on liberalization and will shortly be accepting competitive bids to deliver mail in 70 urban areas — markets worth approximately €168 million. As well as delivering mail, Poste Italiane runs extensive financial and payment systems in Italy.

CUBA LOOKING AT “STRUCTURAL CHANGES”

Many observers say that Raul Castro may introduce reforms in the moribund Cuban economy, but it doesn’t appear that major reforms, much less privatization, of the postal service’s six separate enterprises will be advanced.

The Cuban postal service is growing, as 48 percent more letters and packages were handled in 2007 than in 2006, due mainly to both new customs regulations that permit consumer electronics to be sent abroad and the increase in foreign students studying in Cuba. The postal service is slated to add 2,000 new computers and a track-and-trace system in its distribution centers, according to Cuban newspaper Granma.