International Postal Update – Liberalization Shakes Up U.K.

LIBERALIZATION SHAKES UP UK

In the deregulated UK mail market, state-owned Royal Mail and one of its main competitors, TNT Post, the Netherlands’ former state-owned mail carrier, are in a heated battle over pricing. TNT is a Royal Mail customer as well as a competitor, with Royal Mail obliged to deliver other carriers’ letters over its “final mile” network. Royal Mail is allowed under current postal regulations to charge them 13 pence for every letter, but is seeking to raise that price. TNT says that allowing Royal Mail to raise the rate would close the gap between wholesale and retail prices, severely restricting competition. Postcomm, the UK postal services regulator, has launched a review of the charges Royal Mail imposes on other operators.

The union that represents Royal Mail employees is demanding a 27 percent pay-raise and a cut in working hours from 40 to 35 a week. The current pay arrangement between Royal Mail and the Communication Workers Union is due to expire in April. Royal Mail, the state-owned former monopoly carrier, dismissed the demand as impossible, saying it would cost the company £1 billion a year.

New market entrants such as TNT Post and DHL have secured about 25 percent of the bulk business mail market since it was opened to competition on Jan. 1, 2006. Royal Mail said that the growth in competition occurred at a faster pace than predicted.

EUROPE TIMELINE UNCERTAIN

German Finance Minister Peer Steinbrueck cast doubt on the timeline for full liberalization of his country’s postal market, currently scheduled for Jan. 1, 2008. In March, he said it made sense to end Deutsche Post’s domestic letter mail monopoly as planned only if other European markets did so as well. He pointed out that France, Italy, Greece and Portugal were not ready to open their postal markets by Jan. 1. “In my understanding, this has nothing to do with fair competition” he said. However, Economy Minister Michael Glos assures observers that Germany is sticking to its early demonopolization plans. Under a European Commission proposal pending parliamentary approval, the 25 EU members have until Jan. 1, 2009 to fully open their mail markets. Sweden, Finland, Estonia and Great Britain already allow full competition.

La Poste, the French monopoly postal operator, has offered its employees a 0.6 percent pay increase in May followed by a 0.9 percent increase in July. Both La Poste and the French government oppose the 2009 date for postal liberalization. With national elections scheduled for this year, postal privatization looks likely to become a campaign issue.

GLOBAL PRIVATIZATION PROGRESS

Israeli postal privatization moves forward. The government will sell up to 49 percent of Israel Post Company on the Tel Aviv Stock Exchange by May 31, under a proposal drawn up by the Government Companies Authority’s privatization unit, the Israeli business newspaper Globes reported in March.

Japan Post will expand its financial services offerings. The company said it would offer mortgages, credit cards and small business loans after it is privatized and split up in October, under the scheme pushed through by former Prime Minister Junichiro Koizumi. Japan Post already takes deposits and makes loans, and is the world’s largest deposit-taking institution with assets of some $1.6 billion.

High rates charged by monopoly carrier Canada Post are responsible for limiting the country’s e-commerce growth, according to the National Post. Rising rates are squeezing eBay vendors, and account for why Canadians shop online only half as much as Americans. Canada Post has declared a profit of CAD $200 million a year, on average, in each of the last three years.