Deutsche Post Subsidised into the UK
BONN In the United Kingdom, the Deutsche Post is entering into direct competition with Royal Mail, which is on the rocks after sustaining major losses. While seeking to become a market leader in Germany's neighbours, the German group's basis for expansion in the domestic market continues to be secured by means of controversial state aid.
The company, whose base is in Bonn, is taking over the British letter service Speedmail International, whose activities are concentrated in the London area, where it has a limited licence to deliver mail. However, a long-term licence issued by the UK regulatory authority Postcomm has now removed any restrictions on Speedmail's handling of mass deliveries and business mail services. Having already been granted a licence, Deutsche Post has a foothold in the UK letter market, and regards the firm as a basis for further expansion in it.
Seizing opportunities
Deutsche Post World Net (described as the ,,biggest postal enterprise in Europe") has the declared objective of assuming a leadership role in the major domestic postal markets. Its Chief Executive, Dr Klaus Zumwinkel had already announced on several occasions that Deutsche Post wanted to seize the opportunities presented by the deregulation of European postal markets. It intends to make massive profits from the imminent privatisations of state-owned postal services in the countries bordering on Germany.
Securing advantages
On the other hand, Deutsche Post's basis for expansion in the domestic market is still safeguarded from competition by massive subsidies from the State. It was laid down in 1994 that the State would top up the funds if the former monopoly's employee benefit reserves ran out. Deutsche Post also has the advantage of being exempted from turnover tax on its provision of universal services. Its most important advantage, though, is its exclusive licence, which puts its competitors at a disadvantage and leaves the way open for cross-subsidies between the monopoly and the deregulated operation.
Various proceedings involving the European Commission have provided evidence that Deutsche Post supports its parcels operations by means of cross-subsidies, and in a manner that distorts competition. In October 2003, the German Constitutional Court ruled that the further extension of this exclusive licence was not contrary to the constitution. While Deutsche Post makes profits from the deregulation of postal markets abroad, the German Monopolies Commission (which operates under the Ministry of the Economy) is reported as having doubts about ,,the liberalisation of the letter deliveries markets generally"within Germany itself.
Sources:
Zementierung des Postmonopols. Pressemitteilung der Monopolkommission vom 11.Dezember 2003; www.monopolkommission.de
Deutsche Post World Net uebernimmt Speedmail International; www.dpwn.de
Post stoesst Tuer zum britischen Briefmarkt auf; Financial Times Deutschland 27.01.2004
