'Bloodbath' looms for Deutsche Post
Deutsche Post AG may be defenseless against invaders into its lucrative home turf as the rest of Europe backtracks on promises to throw open national mail markets.
A two-year delay in opening most of the region is thwarting plans by Europe's biggest postal service to expand. That leaves Deutsche Post little room to improve margins when its letter-delivery monopoly in Germany, its most profitable business, ends January 1. The shares have dropped 18 percent since April, after more than doubling in four years as Deutsche Post shed workers and boosted profit.
"This can turn into a bloodbath. It can drag on for years," said Michael Gierse, who helps manage 160 billion euros at Union Investment GmbH in Frankfurt. The fund recently reduced its stake in Deutsche Post.
Deutsche Post has forecast domestic competition will trim earnings at its mail division - which makes up over half the company's income before interest and taxes - by as much as 20 percent by 2009.
Shares of the Bonn-based company may extend their decline by 7 percent, according to Andre Mulder, an analyst at Kepler Equities in Amsterdam with a "reduce" rating on the stock.
The delay in ending monopolies in countries including France, Spain and Italy will "put a halt to Deutsche Post's foreign expansion", said analyst Michael Benedikt at Commerzbank AG in Frankfurt.
The European Parliament dealt a blow to Deutsche Post's expansion strategy on July 11 by voting to allow mail monopolies throughout the European Union to continue until at least January 2011. Deutsche Post had urged the parliament to stick with an original plan to open markets no later than 2009.
EU governments are expected to back the decision, Markus Ferber, a German member of the European Parliament, said on July 11. Even so, Germany is pushing ahead with its own liberalization. Economy Minister Michael Glos said in June he saw no reason to change the timetable.
"We have a liberalization mess on our hands," Deutsche Post's Chief Executive Officer Klaus Zumwinkel said last Friday. "Everybody can come to Germany, but Germans can't go abroad."
Deutsche Post has been preparing to compete at home and abroad since the German state began selling stakes in the company in 2000. The state still holds 30.6 percent of Deutsche Post through development bank KfW Group.
Cutting back
To cut costs, Deutsche Post closed about 4,000 post offices in the past 10 years and shed 140,000 jobs, mostly in the domestic mail and parcel businesses. The mail division employed almost 130,000 at the end of 2006.
Deutsche Post also made about $20 billion in acquisitions in businesses such as logistics, express delivery and freight as e-mail began supplanting letters and competition to ship heavier items in Germany increased.
Takeovers of Plantation, Florida-based DHL Worldwide Express in 2002 and Seattle-based Airborne Express Inc in 2003 positioned Deutsche Post as a global express delivery company pitted against United Parcel Service Inc and FedEx Corp.
The 2005 purchase of Bracknell, England-based Exel Plc made Deutsche Post the world's largest manager of warehouses and inventories.
Bloomberg News
(China Daily 08/10/2007 page16)
