International Postal Update – Competition, Privatization Move Ahead in Europe

COMPETITION, PRIVATIZATION MOVE AHEAD IN EUROPE

UK GOVERNMENT USES PRIVATE POSTAL CARRIERS

Postal competition is saving the British government money. The public sector spends nearly £650 million (1.2 billion USD) a year on mail, or about 10 percent of the postal market. Since September, the Department of Work and Pensions has been using two private carriers, UK Mail and TNT Mail, to send second-class post, which has saved it £53,000 (98,169 USD) on the cost of sending 3.2 million items, the Times of London reported. Previously the Department had used former state monopoly Royal Mail for most of its postal needs.

Royal Mail, which remains government-owned, still receives public subsidies. In May, Royal Mail announced that the government had given it £1.75 billion (3.24 billion USD) to help cover a pension fund deficit and pay for modernization.

Britain’s Office of Government Commerce, which negotiates business deals for the government, is now urging other public sector agencies to stop using Royal Mail because it does not offer the same value for money as its competitors. In an effort to cut £30 million (55.6 million USD) from its postal costs, the government is urging departments and councils to switch away from the Royal Mail and use one of eight private-sector suppliers instead.

The Royal Mail lost its monopoly on bulk mailings in April 2003, and the entire UK mail market was opened to competition on January 1, 2006, three years ahead of the European Union goal of full postal liberalization by 2009. Analysts have predicted that in the short term, competition will primarily affect business-to-business and business-to- consumer mail.

PRIVATIZATION IN EUROPE

Austrian Post, or Osterreichische Post AG, was partially privatized on May 31, with shares trading on the Vienna Stock Exchange. The stock, issued at 19 EUR (24 USD) a share, was eight-fold oversubscribed, indicating strong demand. In preparation for the initial public offering, Austrian Post had applied major restructuring and cost-cutting measures over the past year. In February the company reported that its 2005 net profit had doubled to 99.9 million EUR (126.3 million USD) over the previous year. Austrian Post’s letter-mail monopoly is expected to end by 2009, in line with an EU deadline.

The chief executive of Poste Italiane has said that Italy’s state-owned postal operator is ready to be privatized, and that he sees Deutsche Post’s two-phase listing as a good model to follow. CEO Massimo Sarni said that it would take about 12 months to complete the procedures necessary prior to an IPO. He noted that an alternative route to privatization, instead of an IPO, would be to sell the Treasury’s 65 percent stake in Poste Italiane to the state-owned bank Cassa Depositi e Prestiti, which already owns 35 percent.

A report by the European Commission reveals that the majority of postal users are least satisfied with the cost of mailing a letter, compared to other aspects of postal service. The findings are similar to those of previous surveys conducted by the Free and Fair Post Initiative, a pro-liberalization group.

U.S. POSTAL SERVICE MOVES TOWARD ANNUAL INCREASES

On May 3, the U.S. Postal Service filed for a new rate increase with the Postal Rate Commission. If approved, the increase would push the price of a First Class stamp to 42 cents in 2007. The request comes less than four months after USPS raised stamp prices from 37 to 39 cents. Postmaster General John Potter has said the Postal Service plans to increase rates annually starting in 2009. The USPS also announced that it has plans to introduce a Forever Stamp.

In June, Canada Post announced a one-cent increase (2 percent) in the stamp price for domestic letters. Canadian law sets a hard price cap at two-thirds the rate of inflation, as measured by the Consumer Price Index.

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