Both rumours and news about mergers and acquisitions in the European postal market are increasing to the point where it becomes legitimate to ask oneself:
Where this potential concentration process might lead to?
As a matter of fact, several large operators are presently trying to buy shares of, or even entire operators, so as to prepare themselves for the total liberalisation of the market.
This evolution may well jeopardize the benefits which could be expected from the liberalisation process in Europe, as market entry barriers grow and competition decreases.
Deutsche Post (DP) is the most active postal operator worldwide when it comes to acquisitions. And indeed, after buying Danzas and DH, its Deutsche Post World Net (DPWN) has become the world's largest logistics provider. But, it is not only in the fast growing and therefore more interesting logistics market where DP is growing. Also, in the declining mail market, DP is extending its already large network. After the Austrian government has refused a bid for buying Österreichische Post (ÖP), DP is now trying to buy 25% of Post Danmark. And its chances to succeed are considered to be high, as Post Danmark is already in cooperation with DP subsidiary DHL.
Österreichische Post (ÖP), is not known as having an expansive strategy, but it has obviously been stimulated by the enlargement of the European Union (EU) and is now trying to gain ground in the new member countries: In a press release, ÖP announced their market entry together with Slovenian Post in Eastern and South-Eastern Europe. As a direct reaction, DPD, the French postal subsidiary, ended on 1st of September their contract with Slovenian Post, Even through, Slovenia Post was planned to become a DPD franchisee. DPD instead founded a joint venture with Austrian private logistics operator, Lagermax, with whom they already operate in Hungaria.
Although the above mergers and acquisition activities are just examples, they are all linked and as such quite representative of the current trends in the European postal.
To recall, over the past 8 years one could observe a phase of mergers and acquisitions mainly in the field of logistics and the pattern was quite simple: The buyers were historical (state-owned) postal operators (e.g. Deutsche Post, La Poste, TPG Post) and the targets were privately owned providers of logistic services (e.g. TNT, DHL, Danzas, Nedloyd).
However, the most recent trends indicate that publicly owned operators of small countries now are also becoming acquisition targets of the big public players.
Do we therefore enter a new area of a mergers and acquisitions process whose outcome may well be that most of the medium-sized public operators will be in part or entirely owned by a few large operators?
Without doubt, the big national players in the European postal market are preparing themselves for the days when monopolies will be totally abolished. By bundling mail streams within, from, and to the different countries, they are trying to realise economies of scale. Although cooperation on a contractual basis has always been an important business model in the postal sector, the very nature of legal face of cooperation is now changing and as large packages of shares or entire operators are being and therefore strongly controlled.
However, the question remains as to how big these new consolidated operators can grow, and what consequences this will have for competition as well as for customers, quality and innovation. Quite obviously, the European postal market is the network industry sector which encounters least resistance from national government, competitors, and customers, with the exception perhaps of the unions.
But, if we extrapolate this scenario, we find that the very objectives of the liberalization process in the postal sector might well be threatened because of the big operators' expansive strategies. Indeed, market entry barriers for new providers will be much higher than before, while concentration may well lead to cartels, duopolies, or even supra-national monopolies. The range and price of postal products and services for many parts of the sector will be defined by the CEO's. Furthermore, while in the past, excessive prices or low service quality could somewhat be corrected through a political process, possibilities for intervention might well be limited in the future.
There will remain many countries which would not want their national postal operators to be controlled or event bought by a large competitor. However, competitive pressure will most likely become so strong that such national historical operators can only survive if they are competitive with the big operators. Countries like for example Switzerland which try cement ancient structures will have to face the reality that the market does not stop at the border and appropriate international strategies have to be further developed.
http://newsletter.epfl.ch/mir/index.php?module=Newspaper&func=viewarticle&np_id=6&np_eid=1&catid=5
11.10.2004
Patrick Mollet