Strength in numbers
October 12, 2009
Regional postal companies, such as Berlin-based Pin Mail, Citipost in Hannover, and Arriva in southwest Germany will join the consortium, according to a report in the German business magazine Wirtschaftswoche.
While consortium members will retain their own names and regional identity, their alliance aims to establish a joint national distribution network by the end of the year. German subsidiary of Dutch-owned TNT will be in charge of this process, according to the report.
TNT spokeswoman Daphne Andrisse said her company was actively considering forms of co-operation in Europe, but declined to provide any further details. "We will report on material progress once there is material progress to report," she said.
David and Goliath
Despite losing its monopoly status at the beginning of 2008, Deutsche Post has managed to maintain the lion's share of the German postal market, making approximately 90 percent of all letter deliveries.
Smaller competitors have struggled to challenge Deutsche Post because their young operations have been limited to regional markets. Analysts estimate the firms joining the Mail Alliance could achieve a six percent market share once their national network is up and running.
ING analyst Axel Funhoff told Deutsche Welle that the move was more important for the regional minnows than it was for the Deutsche Post itself.
"This consolidation amongst Deutsche Post's competitors will de-risk their own positions in the German mail market and increase their impact," he said.
TNT, Deutsche Post's largest single competitor with a four percent market, has been making annual losses of 20 million euros in Germany.
A difficult market for newcomers
However, Funhoff described their attempt to establish themselves in this market as an "uphill struggle". Currently, Deutsche Post -- as Germany's only universal mail provider -- enjoys the advantage of being exempt from paying sales tax.
The introduction of a minimum wage in the sector -- a move backed by Deutsche Post -- was also a considerable blow to its smaller competitors.
The president of the Employers' Federation of New Letter and Delivery Services (AGV NBZ), Florian Gerster, told Passauer Neue Presse that he welcomed the formation of Mail Alliance. "I am optimistic that this tie-up will make the small mail service providers stronger," he said.
Cost to the workers?
Gerster also said the smaller competitors could expect help from the new governing coalition of Christian Democrats and Free Democrats.
"There is a sizeable chance that there will be changes to the Post's exemption from sales tax and the Post minimum wages," he said.
ING analyst Funhoff predicted a "downward spiral" in salaries in the sector, pointing out that minimum wage agreements are due to expire in April 2010 and are unlikely to be renewed by a centre-right government.
This could see Deutsche Post outsource a lot of its work into the low-wage sector in a bid to retain its market position, he forecast.
Deutsche Post has also been seeking to increase its share of foreign business ahead of the liberalization of postal services in the European Union on January 1, 2011.
Reporter: Julie Gregson
Editor: Sam Edmonds