The document discusses Deutsche Post World Net's international mail activities. It provides an overview of DPWN's strategy to expand internationally in response to liberalization of domestic mail markets. It summarizes DPWN's activities in cross-border mail delivery and domestic mail services in several countries, including the Netherlands, Spain, UK, and value-added services provided by Williams Lea. The document presents information on DPWN's revenues, market shares, and approach in different regions.

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)
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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