Dutch-British Postal Alliance Moves to Block German Dominance of Postal Markets

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AMSTERDAM/LONDON - The joint venture among the Dutch, British and Singaporean post offices announced last month is a "defensive gesture" designed to blunt the German drive for dominance on world postal markets.


Sources in the global postal world report that the British and the Dutch had been discussing the move "on and off" for some time both to slow the Germans and to boost their own market share of cross-border mail.


The Deutsche Post AG (DPAG) went on a two-year buying and start-up spree in Europe and the US that has cost upward of $6.5 billion and given the Germans a continent-wide network of logistics, transport and parcel delivery services as well as a strong presence on the US market.


Right now the Dutch-British-Singapore deal is being taken past the EU and other regulators while due diligence is carried out. The process should be completed in three months with the new joint venture up and running by July.


It will bring important changes to global postal markets, Royal Mail spokesman Stephen Davie said, by combining the network of TNT, a global Dutch-owned courier service, with the regional strengths of Singapore Post and Royal Mail's mail volume.


This will allow creation of a viable alternative delivery network to that of local postal administrations. Alternative delivery has long been a buzzword in the postal world, but no one has yet offered a robust version.


"Cross border mail still gets inserted into national postal monopolies for delivery. The joint venture will change that - which is why DPAG is so worried by the development.


"With alternate delivery you can change the type of products and the level of service which customers get, which will be very important for DM companies. Price, speed and response mechanisms can all be changed," Davie said.


The Dutch have had a fifty-fifty deal with Singapore Post for some time combining the international mail of both companies in the Asia-Pacific region. Singapore will now take a 24.5 percent stake in the new company as will Royal Mail. TPG, the Dutch Post, retains a majority 51 percent.


The new company will be headquartered in Brussels with Theo Jongsma, the head of the TNT International Mail, as CEO. Jongsma said he does not plan to rename the company at this time in order to keep the three brands alive.


And they will include the capability to develop more alternate delivery services. The Dutch, for example, have developed alternate delivery services in India and Latin America which will now be open to Royal Mail and Singpost.


Working with TNT the Dutch Post has developed a city by city direct entry network in India "that gives us far better cost-price opportunities than we would have just giving our mail to India Post.


"We have agents in every large city in India, either through TNT or by hiring local agents. Now a lot of mail goes outbound from the UK to India so our British partners would benefit from our network."


Local PTTs, Jongsma noted, are dependent on each other for delivering cross-border mail and that dependency is the "weak link" in the chain since some posts are good and other "are lousy.


"We actively promote alternatives to domestic posts by giving our mail to other people and stirring up domestic mail competition. We will use alternatives where they exist and when we have the volume we will create them."


Jongsma plans to work with a small staff of 35 to 40 people drawn from the three partners encompassing strategy, finance, marketing, quality control and communications. He picked Brussels because Amsterdam is top-heavy with other TPG corporate offices.


The new company will offers services in all sectors of cross-border mail including parcels but will focus on international bulk mail, the financial industry, direct marketing, publishing, and "obviously" e-commerce.


The joint venture will not start from scratch since the different pieces already account for an annual turnover of 1 billion Dutch guilders ($434.7 million) with an anticipated profit of 80 million guilders ($34.7 million).


It will not, however, eliminate domestic competition among the partners. The Dutch will fight Royal Mail on its home turf and vice versa. On cross-border mail they will work together, for example by merging their US sales teams.


Jongsma declined to characterize the new combine as a challenge to the Germans, saying only their approach of buying "bits and pieces" will be hard to integrate, since they are all under pressure to contribute to profits.


His own approach, Jongsma said, was akin to the airline industry by combining strong partners, "like KLM and Northwestern, for example, and that will give us a better combination than the Germans."


The Germans profess little concern about their new competitors. "We are well equipped to face all competitors," DPAG spokesman Uwe Bensien said.


"This is a strong alliance that we take seriously but


we have long expected this development. DPAG has been following a similar strategy of worldwide growth.


"Our International Mail Service division, which we are rebranding as Deutsche Post Global Mail, is already very strong in the international letter business. We have strong partners and will add more of them in the future."


Bensien said the Germans welcomed competition but termed the new combine a "defensive move" in a rapidly changing global postal market "where only three to five global players will survive. DP will probably be the leader."
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