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05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
05 Pickave Wik Koenigswinter2007
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05 Pickave Wik Koenigswinter2007

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  • 1. Competition in Regulated Mail Markets First experiences and conclusions Wolfgang Pickavé • Königswinter • 13 February 2007
  • 2. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 2
  • 3. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 3
  • 4. The strategy of DPWN DPWN has successfully completed its three phase strategy; the new goals: to increase customer satisfaction and to realize organic growth Phase 3: Becoming No. 1 integrated Phase 2: logistics company International expansion 2001 - 2005 Phase 1: Turnaround 1998 - 2000 1990 - 1997 wik Seminar • Königswinter • 13 February 2007 Page 4
  • 5. The strategy of DPWN While the continuing liberalisation of the mail markets is posing a challenge in Germany, internationally it is seen as an opportunity … to offset impending losses of market share in the DPWN’s goal national mail market by gaining market share in other markets … to expand our service offering for business customers … to increase our presence abroad Three approaches … to continually optimize the costs of our transport and delivery network and to make it more flexible … acquisitions Three entry strategies … co-operations … development of our own networks wik Seminar • Königswinter • 13 February 2007 Page 5
  • 6. The strategy of DPWN Revenues of DPWN Mail International 2.098 bn Euro 1.715 bn Euro 1.531 bn Euro 1.445 bn Euro Revenues including value-added services of Corporate Division MAIL 2002 2003 2004 2005 Extension Start Expansion Further Expansion of international in domestic mail in domestic mail in domestic mail network market NL markets USA, F, E, UK markets UK, J wik Seminar • Königswinter • 13 February 2007 Page 6
  • 7. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 7
  • 8. DPWN’s International Mail Activities DPWN’s international mail business is covering activities along and beyond the traditional postal value chain Cross Border Services Domestic Services Value Added Services wik Seminar • Königswinter • 13 February 2007 Page 8
  • 9. DPWN’s International Mail Activities Cross-border mail: Global market share (2005) DHL Global Mail 14 % Other postal operators 44 % Total value: ~ € 10 bn USPS 14 % With a market share of 14% Deutsche Post is among the two largest suppliers in worldwide cross-border mail Royal Mail 9% La Poste TNT/Spring Swiss Post 7 % 6% International 6% Source: UPU Statistics, Annual Reports wik Seminar • Königswinter • 13 February 2007 Page 9
  • 10. DPWN’s International Mail Activities Cross-border mail: DHL Global Mail’s business GLOBAL MAIL GLOBAL MAIL GLOBAL MAIL GLOBAL MAIL BUSINESS DIRECT PUBLICATION PARCEL Solutions for Solutions for Solutions for Solutions for international business international direct international international parcel mail marketing publication distribution post Priority Service: 3-8 days Service levels Standard Service: 8-14 days Economy Service: 14 days+ (overseas) Standard Features Value added services ■ Basic consulting on international DM ■ International address management ■ Pick-up (based on minimum volume) ■ Comprehensive DM consulting ■ Invoice itemized by zone ■ Database management (for DM) ■ Customs clearance ■ Registered mail ■ Sorting, franking (not for DIRECT) ■ Sorting, franking, lettershop services (for DIRECT) wik Seminar • Königswinter • 13 February 2007 Page 10
  • 11. DPWN’s International Mail Activities DPWN’s domestic mail services Approx. 50 processing centers Approx. 35 sales offices Approx. 4,000 employees in cooperation with joint venture with London Utrecht Chicago Toronto Frankfurt Newark Tokyo Los Angeles Miami Dubai Hong Kong Mexico City Singapore in cooperation with Buenos Aires Sydney Main domestic processing centers International processing centers wik Seminar • Königswinter • 13 February 2007 Page 11
  • 12. DPWN’s International Mail Activities Domestic mail services in the Netherlands Dutch mail ■ One of the most de-regulated markets in Europe (~50% of market market accessible) characteristics ■ Direct Mail and outgoing cross-border mail fully liberalised, letter mail above 50g liberalised ■ Full market opening expected 2008 (new postal act pending) ■ Highly competitive environment Deutsche Post ■ 1999: Creation of DHL Global Mail Netherlands (cross border mail) track record in ■ 2002: Acquisition of unaddressed distributor Interlanden the Netherlands ■ 2002: Merging the addressed mail operations of Interlanden and Selektvracht resulted in the birth of Selekt Mail Netherlands (JV Deutsche Post 51% and Wegener 49%) ■ 2003: Purchase of 20% share in PO Box deliverer MailMerge (increased to 100% in 2006) wik Seminar • Königswinter • 13 February 2007 Page 12
  • 13. DPWN’s International Mail Activities Domestic mail services in the Netherlands provided by SelektMail: Nation-wide delivery of addressed mail items, focus on non-prio segment DIRECT MAIL MAGAZINES INBOUND Solutions for the delivery of Domestic direct mail Domestic magazine inbound non-priority mail distribution distribution (outside reserved area) Tuesday - Wednesday delivery cycle Service levels Economy service: 4 - 6 days Thursday - Friday delivery cycle MARKET SELEKT MAIL ■ Moderate volume decrease: -0,7% p.a. until 2009 ■ Nation-wide delivery capability of addressed mail items with a focus on Non-Prio segment ■ Limited impact of electronic substitution ■ Selekt Mail revenues more than tripled between 2003 and 2005 ■ Growing well above the market wik Seminar • Königswinter • 13 February 2007 Page 13
  • 14. DPWN’s International Mail Activities Domestic mail services in The Netherlands provided by Interlanden: Distribution of unaddressed items FOLDERS WEEKLIES SAMPLING Solutions for the distribution of Solutions for distribution of Solutions for distribution of folders weeklies samples Regional / selective delivery Service levels Nation-wide delivery MARKET INTERLANDEN ■ Stable volume development, approx. 2 to 4% p.a. until ■ One of the market leaders in unaddressed distribution in 2009 business since 1969 ■ Strong position of Direct Mail in the Netherlands ■ Largest market player together with TNT Post / VSP wik Seminar • Königswinter • 13 February 2007 Page 14
  • 15. DPWN’s International Mail Activities Domestic mail services in Spain Spanish mail ■ Direct Mail and Intra City Mail fully liberalised market ■ Cross-border and domestic mail up to 50g reserved to Correos characteristics ■ Mandatory Downstream Access ■ Highly competitive environment ■ VAT exemption for Correos only for reserved services Deutsche Post ■ 1972 first company within Unipost founded track record ■ 2001 Unipost founded as a company in Spain ■ 2004 legal restructuring ■ 2005 DPWN bought 38% stake wik Seminar • Königswinter • 13 February 2007 Page 15
  • 16. DPWN’s International Mail Activities Domestic mail services in Spain provided by Unipost: Distribution of addressed items BUSINESS MAIL DIRECT MAIL PUBLICATIONS SERVICES • Distribution of intra- • Distribution of direct city mail mail • Distribution of • Pick-up service • Distribution of inter- • Irregular formats magazines/ • Planning and realisation city mail >50g handling publications of Direct Marketing • Registered mail • Flexible delivery date • Distribution of campaigns • Franking and inserting • Information service catalogues • Returns management of inter-city mail <50g and feedback to DM • Distribution of samples into Correos network campaign MARKET Unipost ■ Rather low mail density (90 items per person) ■ Leading private mail provider with 30 years experience in 2 ■ Rather low population density (87 inhabitants per km ) mail business ■ Market highly fragmented ■ Network covers 70% of the Spanish market with presence in all major cities ■ Government decided that Correos has to open its network for private operators at the same conditions as ■ 15,000 customers, 2 m items per day for mass mailers ■ 185 service centres ■ 2,000 employees at Unipost and 2,000 employees at franchise companies wik Seminar • Königswinter • 13 February 2007 Page 16
  • 17. DPWN’s International Mail Activities Domestic mail services in the UK British mail ■ Fully liberalised mail market since 2006 market ■ Mandatory Downstream Access characteristics ■ Royal Mail is fully VAT exempt for all postal services ■ Strict regulatory regime ■ Big mailing volumes start to switch to private operators ■ No alternative end-to-end network so far Deutsche Post ■ 1997: Creation of Deutsche Post Global Mail UK Ltd. track record in the UK ■ 2004: Acquisition of Speedmail International ■ 2004: Deutsche Post Global Mail concludes access agreement with Royal Mail ■ 2004: Deutsche Post Global Mail receives long term licence wik Seminar • Königswinter • 13 February 2007 Page 17
  • 18. DPWN’s International Mail Activities Domestic mail services in the UK provided by DHL Global Mail UK: Distribution of addressed mail DIRECT MAIL PUBLICATION SORTING/FRANKING • Offer to take all mail (domestic and international) • Delivery service for certain from mail room and insert postcodes areas in London • Delivery service for certain into appropriate network, • Downstream Access with residuals to Royal Mail postcode areas in London final mile delivery by Royal • Service to sort mail for Mail customer for DSA access (Suresort) MARKET DHL Global Mail UK ■ Fully liberalised mail market since 2006 ■ Own B2B delivery network in defined London postcodes ■ Besides Royal Mail four big mail providers: BX (incl. ■ Unsorted and sorted DSA offering SMS), TNT, UKMail and DHL Global Mail ■ Constantly growth of revenue ■ Royal Mail lost some big accounts like BT and DWP to competition ■ The total regulated UK addressed mail market was worth £4.65 billion in 2005/06 wik Seminar • Königswinter • 13 February 2007 Page 18
  • 19. DPWN’s International Mail Activities Value added services provided by Williams Lea: Corporate Information Solutions OFFICE DOCUMENT CUSTOMER CORRES- MARKETING SOLUTIONS SOLUTIONS PONDENCE MANAGEMENT • Word processing/presentation • Scanning, indexing and data services • Design capture • Records and information • Multimedia/intranet/internet • Mailroom management/digital management development mailroom • Multi Functional Devices/copier • Enterprise content management • Micrographics or printer management • Print and campaign management • Document composition • Mail and messenger management/digital mailroom • Warehousing, stock management • Statement/variable data printing and logistics • Warehousing, stock • Fax / Courier management • Fulfilment and distribution management and logistics • Operational print management • Fulfilment and distribution • Litigation support MARKET Williams Lea ■ Increasing trend for document management outsourcing ■ Global leader in Corporate Information Solutions ■ Only few players in the sophisticated correspondence ■ 2006 revenue 780 m€ management market ■ 8,000 staff worldwide ■ Big international corporations have strong need for service providers with global reach and sufficient ■ DPWN currently holds 66 % financial strength to fulfill increasingly large deals wik Seminar • Königswinter • 13 February 2007 Page 19
  • 20. DPWN’s International Mail Activities Williams Lea Network London New York Wheeling Tokyo Hong Kong Chennai KEY: Sydney Hub: Satellite: wik Seminar • Königswinter • 13 February 2007 Page 20
  • 21. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 21
  • 22. Some generic considerations New entrants to the postal market have to undertake a thorough market analysis and an assessment of the regulatory framework Total Market Liberalised Market Accessible Market • Regulatory hurdles ? Legal certainty • Volume • Universal service or other service ? Regulatory certainty • Growth potential obligations • Geography • Authorisation / licence ? Promotion of competition conditions • Competition ? Regulatory enforcement • Access to the • Reserved area incumbent’s network (commercial, • Accessible segments / operational and Market entry niches regulatory terms) recommendable? • Other hurdles wik Seminar • Königswinter • 13 February 2007 Page 22
  • 23. Some generic considerations New entrants to the postal market have to choose a business model ensuring differentiation from the incumbent CHALLENGES: POSSIBLE ANSWERS: Economies of scale Lower frequency of delivery Geographical coverage Geographical cherry picking Personnel Part time, item based wik Seminar • Königswinter • 13 February 2007 Page 23
  • 24. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 24
  • 25. Experiences and observations Some observations regarding the regulatory framework and other conditions impacting market attractiveness and development of competition 1. Status of liberalisation in European Member States and the various market segments varies 2. Regulatory framework causes market entry barriers in markets or segments that are already formally open to competition 3. VAT issue is still waiting for a solution at European level 4. Obstacles beyond the pure regulatory framework are negatively impacting the development of competition wik Seminar • Königswinter • 13 February 2007 Page 25
  • 26. Experiences and observations 1. Status of liberalisation in the European Member States Domestic Mail Direct Mail Outbound cross-border Mail • Spain: - Intra-city mail fully liberalised • Germany: - Competition even <50g (“D-type licenses”) Monopoly <50g Fully liberalised - Full market opening in 2008 • Netherlands: - Full market opening in 2008 expected wik Seminar • Königswinter • 13 February 2007 Page 26
  • 27. Experiences and observations 2. Licensing conditions representing market entry barriers ■ Example Finland: ■ Example Hungary: • Licensed operators have to comply with • Licensed operators have to comply with service obligations similar to USO: – same services standards as USP – Daily delivery (registered and insured items, network of contact points, transit time standards) – Transit time 85 % (D + 1) – minimum requirements concerning • Licensed operators have to financially service capability, working conditions, contribute to the state budget unless the reliability population density of the served region is below 250 inhabitants per km2 – coverage either country-wide or at least one entire district; in case of Budapest: • Financial contribution is not used to at least two additional districts compensate USO burden wik Seminar • Königswinter • 13 February 2007 Page 27
  • 28. Experiences and observations 3. VAT solution not yet available at European level (1) All postal services exempt AT, CY, IE, UK, HU, IT, PL, PT Universal Services exempt BE, BG, CZ, DE, DK, EE, FR, GR, LU, MT, NL, RO, SK Letter services exempt LT Reserved Services exempt ES, LV No exemption FI, SE, SI wik Seminar • Königswinter • 13 February 2007 Page 28
  • 29. Experiences and observations 3. VAT solution not yet available at European level (2) ■ Commission’s initiative of 2003 / 2004 to abolish VAT exemption failed due to missing unanimity in the Council ■ Commission launched infringement procedures against UK (all postal service exempted), Sweden (no exemption at all) and Germany (universal services exempted) ■ Commission’s objectives: – To get clarification regarding the right scope of exemption in line with the European VAT Directive by ruling of the ECJ – To put pressure on the Member States to resume Council activities ■ Commission’s argument in the case of Germany: – Only services provided under USO offered to the general public under terms and conditions (price and quality) available to everybody can and have to be exempted wik Seminar • Königswinter • 13 February 2007 Page 29
  • 30. Experiences and observations 4. Obstacles beyond the pure regulatory framework ■ Example: Austria ■ Example: France – In Austria many letter boxes in apartment – In most big cities in France letter boxes in blocks are not equipped with slots to insert apartment blocks are often located behind letters. They need to be opened with a the main entrance door. The door is key, which is in the hands of the incum- usually secured by a PIN code. bent’s delivery men. – Private operators have problems to get – Private operators are therefore excluded access to these codes while delivery men from delivery to these addresses. of La Poste usually know them. – Due to a High Court decision the obligation to replace the respective mailboxes by 2006 has been postponed to 2009. The problem who has to pay for the replacement is still unsolved. wik Seminar • Königswinter • 13 February 2007 Page 30
  • 31. Agenda ■ The Strategy of DPWN ■ The Strategy of DPWN ■ DPWN's International Mail Activities ■ DPWN's International Mail Activities ■ Some Generic Considerations ■ Some Generic Considerations ■ Experiences and Observations ■ Experiences and Observations ■ Conclusions regarding the 3rd Postal Directive ■ Conclusions regarding the 3rd Postal Directive wik Seminar • Königswinter • 13 February 2007 Page 31
  • 32. Conclusions regarding the 3rd Postal Directive The provisions of the Commission’s proposal can be misused to set up entry barriers (1) Ensuring Universal Service Financing of Universal Service Authorisation Procedures MS have to ensure, that universal MS may introduce mechanism to Art. 7 MS may grant authorisations to Art. 9, 2 Art. 4 service is guaranteed compensate USP service providers to notify the Commission of steps if USO entails net cost to the extent necessary to taken representing unfair financial safeguard the universal service burden MS may choose one or more USP compensation by public funds or MS may make authorisations (designation) sharing mechanism subject to USO to determine obligations and rights MS may make authorisations / where appropriate conditions: objective, non- licences subject to obligation discriminatory, proportionate, least MS may impose requirements market distortion, limited in time • either to make financial to notify the identity of the contribution to compensation fund designated USP(s) to the if necessary • or to comply with universal service Commission quality, availability, performance of obligations the relevant services MS may decide to let the market provide the universal service MS may impose obligation to make financial contribution to fund where appropriate MS may not for the same quality, availability and performance impose USO on a service provider and the same time financial contributions wik Seminar • Königswinter • 13 February 2007 Page 32
  • 33. Conclusions regarding the 3rd Postal Directive The provisions of the Commission’s proposal can be misused to set up entry barriers (2) Financial Contribution Licensed Designated Compensation Financial Contribution Service USP(s) Fund Financial Compensation Provider • Universal Service Licensed service • Possibility of either Obligation providers can be subject universal service obligation • Obligation to financially to obligations but are or financial contribution contribute not entitled to receive • Possibility of service financial compensation obligations wik Seminar • Königswinter • 13 February 2007 Page 33
  • 34. Conclusions regarding the 3rd Postal Directive Experiences and observations gained so far lead at least to the following conclusions: ■ A reliable European regulatory framework is required in order to enable effective competition in the Member States instead of creating market distortions ■ Full market opening should be confirmed to take place in 2009 ■ Market entry barriers need to be avoided – No overlap of obligations when designating universal service providers – No universal service requirements or similar service requirements on market entrants ■ In order to ensure efficiency financial compensation should only be granted to service providers selected under application of a public procurement procedure wik Seminar • Königswinter • 13 February 2007 Page 34

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