A Tough Year For European Postal Operators
22 April 2009 - Steve Lawson
2009 is becoming a nightmare year for many European postal operators and most, already contending with annual mail volume shrinkage are now trying to weather a global recession.
There are signs at least, of some consolidation with the merger of Swedish and Danish postal operations. Bigger players are certainly better-placed to weather a prolonged economic storm or even run at a total loss in some sectors but it will be a difficult year for everyone, and a total nightmare for some.
Liberalisation is still running at full speed ahead despite what has ultimately been consistent decline for many operators. The problem is, trying to liberalise a market in the midst of a global recession is like trying to change a lightbulb, blindfold, with boxing gloves on. The timetable is there, but there is far less scope for operators to consider risky ventures now, particularly when the decline in stamped mail still hasn't bottomed out yet.
The partial sale of Royal Mail in the UK could not be more badly-timed and Lord Mandelson is struggling to convince anyone that he can strike a good deal in terms of a partnership. It really is a buyers market at the moment and getting the level of investment needed to make a partnership work will need all the dexterity and quick-thinking of a used-car lot salesman. Its important to be optimistic, it always is in this business, but these are difficult times.
We also seem to be witnessing an emerging cross-border problem in terms of rates of pay. The more the markets opens up, the greater the issue will become. Wages make up a significant part of operating costs for any business, and in the case of competing postal operators, trying to be competitive and at the same time, avoid being seen as anti-competitive by the EC is a real juggling act.
Dutch postal workers (TNT) are having to contend with wage cuts or face redundancy, the Baltic states face a domino effect depending on how Latvia copes this year, the French still have a long way to go on liberalisation, and even Deutsche Post is pulling in it's horns to concentrate on those areas that are at least profitable. A recession is not exactly condusive to enterprise and risk. 'Stability' seems to be the most important factor right now.
All operators fully recognise the threat of E-mail but to modernise any postal service and bring it into the digital communication age costs an enormous amount of money. Innovation and diversification are an essential part of surviving in a liberalised market but there isn't exactly a glut of money around right now. Smaller European countries are really struggling to make sufficient headway this year.
The Universal Service is crucial to everyone in Europe but liberalisation still seems centered around competition in what was supposed to be a period of unprecedented growth and opportunity. In the end though, as state-owned postal operators continue to lose their grip on their share of the market and make even more cuts, we could all end up picking up the cost of the USO just to ensure it continues to function whilst everything else vanishes into the private sector. I'm still not convinced that liberalisation will yeild all that has been promised. For the moment, everyone seems to be chasing their own tails....
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