Obstacles litter the race to deliver liberalisation- Romania

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According to the famous saying, the postman always rings twice, but on a market faced with a decline in the number of personal letters, imminent liberalisation and several other burning issues, the rules are about to change. At the dawn of the Romanian postal market liberalisation, Diana Mesesan talks to several key players about the future structure of the market and whether there is hope for development

January 1, 2013, wont be a symbolic day just as the beginning of the New Year, but for the Romanian postal market as well, as it marks the beginning of liberalization.

While other European states, such as Sweden in 1993, and Great Britain in 2005, long ago gave up the monopoly of a state-run postal company, Romania has joined the group of European countries that have opted for a gradual liberalization of the market, which includes Italy, Spain and Greece.

Under the Third Postal Directive (Directive 2008/06/EC), full market opening had to be accomplished by December 31, 2010, for the majority of member states with a further two years allowed for 11 member states. Therefore, after December 31, 2012, the Romanian Post loses its exclusive right to provide postal services covering items of correspondence weighing less than 50 grams and whose price is below two lei and any postal service provider shall be entitled to enter the competition on the free market and provide such services.

However, the National Authority for Administration and Management in Communications (ANCOM) extended the Romanian Post′s obligation to provide a universal postal service, therefore to cover all the areas of the country, by another year, until January 1, 2014. The liberalization of the postal market is not affected by this, because another ANCOM ruling eliminates the exclusive rights the Romanian Post has had so far.

ANCOM officials tell The Diplomat - Bucharest that the decision to keep the Romanian Post as the universal service provider for another year was taken because the national legal framework is currently subject to changes in order to comply with EU legislation in the field.

In order to avoid the high costs the Romanian Post could have incurred from this new situation, a new mechanism to compensate them will be established. "On the basis of financial statements through which the Romanian Post will separate the services outside the scope of universal service from those included in the universal service, ANCOM can individualize and check these costs and therefore compensate the Romanian Post only for the losses generated by the provision of the universal service," ANCOM officials say.

Alexandru Petrescu, executive manager of the Romanian Post, connects the obligation to provide the universal postal service with the negative economic performance of the Romanian Post in recent years.

"The costs related to the provision of the universal service (full coverage of the national territory, affordable rates, quality guarantee requirements) affect the overall performance of the company, even though the rates approved by ANCOM haven't changed significantly since 2008," he says.

Petrescu thinks that the Romanian Post will remain an important actor on the postal market after January 1, 2013 and that a private investor could bring various benefits. "A private investor with financial strength and experience in postal services could be a solution for the recovery of the Romanian Post," Petrescu tells The Diplomat - Bucharest. "The benefits can involve investments in modern equipment, better integration with the postal administrations of other countries, the (re)attraction of strategic customers and the optimization of the range of products and services by optimizing the operational costs."
How are the other players on the postal market reacting to the imminent liberalization?

The current restrictions and exclusive rights of the Romanian Post have not prevented private postal operators from detecting breaches on the market which weren²t subject to the monopoly of the Romanian Post, such as correspondence weighing more than 50 grams or unaddressed mail. According to the report published by ANCOM, last year the Romanian Post processed about 79 per cent of the total postal traffic, with private operators taking on 21 per cent of the deals. This meant a 30 per cent growth for private operators in comparison to 2010.

Marian Seitan, general manager of Mediapost Hit Mail, sees the liberalization of the market as the premise for increased competition. "We can only enjoy the intensified competition and hope that we will offer our clients services of addressed distribution at a better price-value ratio," Seitan says. Mediapost Hit Mail provides direct marketing services and the unaddressed mail distribution represents about 35 per cent of the business. Seitan thinks that in the field of courier services and unaddressed mail, private operators have long outrun the Romanian Post. "Private operators have a considerable advance against the Romanian Post, making up over 90 per cent of each of the two segments."

Whether relations between the Romanian Post and the private postal operators will radically change after January 1, depends on the strategies of each actor. "If we refer to addressed distribution, private operators could be a challenge for the Romanian Post, as long as they organize better and have increased financing capacity and know-how," Seitan says. "It is also possible that the Romanian Post could answer these challenges, defend its positions and even regain market share, as happened in some countries after the liberalization of postal services."

Seitan thinks that the tariffs for addressed distribution could go down after January 1, given the difference between the Romanian Post′s prices and those of other national postal services and the difference between wages in Romania and abroad. However, according to Eurostat data, only four countries in the European Union (Slovenia, Malta, Cyprus and Spain) charge lower prices than in Romania for the handling of a standard letter weighing less than 20 grams in 2010.

For Mihai Balaj, associate at Postmaster, a company operating in the field of unaddressed mail delivery, the liberalization of the postal market means the birth of a new market, on which the firm will be able to fully participate and compete with the Romanian Post. Postmaster is currently active in two main business lines, unaddressed mail distribution, and addressed distribution of mail which weighs more than 50 grams. After the removal of the Romanian Post′s monopoly at the end of December, the company plans to be active in the distribution of items weighing less than 50 grams. However, it is not interested in the field of private letters and will stick to the B 2 X type of distribution (business to business, or business to client).

"You need huge investments and infrastructure to enter the private letter zone," Balaj says. "It is also a decreasing market, because of email and the online world, which are gaining more and more importance. We won′t have any access points where people can enter and leave a letter."
Up to now, the company′s main clients are the do-it-yourself chains, or giants such as Metro and Selgros, which make use of direct marketing to get their message across. The unaddressed distribution volume in Romania is nevertheless poorly developed. "We are still a very small market; even in comparison to Hungary; the volume is at least four times smaller," Balaj tells The Diplomat - Bucharest. "In Romania, about seven letters per person are sent a year , while in Austria, it is 40 letters per person." However, this disadvantage leaves a door open for growth. "There is huge potential for development," adds Balaj.

While the Romanian Post still has to be privatised and officials point to possible investors, such as the Belgian Post or the French Post, Postmaster has moved faster with the privatization. A 26 per cent stake in the company was first bought in 2011 by the Austrian Post, but due to the imminent liberalization of the Romanian postal market, the Austrian group secured its presence by buying the whole company last month. For Mihai Balaj, this move brought several advantages to the company. "This partnership allows us to anticipate certain trends that have already been experienced in Western Europe, such as a shift in paper quality and distribution frequency, new products, and online collaboration. Another big advantage is the possibility of certain regional deals. Austrian Post is already active in Bulgaria, Croatia, Slovakia, Hungary and Poland. Many of our clients are present on all these markets; therefore we can now talk with a certain client about a deal for the whole region."