Post Takes Stake in DHL to Become Global Player, Challenge UPS

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FRANKFURT - The German post office last month bought a 22.5


percent stake in DHL for an undisclosed sum in a clear effort to become a global player in the express delivery business.


The move is seen as a direct challenge to UPS, Federal Express, Airborne and the Dutch-owned TNT on European and other international markets including the US.


Deutsche Post AG has stayed out of the US postal market after concluding a cooperative agreement with USPS's International Business Unit that made the Germans partners in IBU's efforts to bring more US catalogers to Europe.


Dr. Klaus Zumwinkel, head of Deutsche Post, told a press conference here on March 25 that long run "only a select few international joint ventures can be successful on the express courier and parcels market."


The joint venture, which Zumwinkel called a "strategic alliance," will give Deutsche Post "access to a worldwide logistics network for express products.


"In acquiring a holding in DHL, we are now taking the fast track towards entering the express market and gaining the market leader as a strategic partner," he said.


"This is Germany's answer to the Dutch acquisition of TNT last year," a postal source said. "We will now be able to deliver packages and documents that must arrive at a time certain and where price is not a factor.


"Business customers - and they have the money -- want complete solutions because today everything is more computer and IT-driven. Delivering a package is much more than transpiration. It demands track and trace, electronic customs clearance, etc.


"That puts us on the American market and UPS will have to take another look at the competition DHL can now offer at home and abroad. UPS, Fedex and Airborne are going to lose market share."


Asked for comment on the German move a Federal Express spokesman said "essentially the fundamental issue here is whether a governmental entity should use government money to buy into a private company.


"We hope that there would be appropriate competition authorities looking into this acquisition and giving it careful scrutiny."


UPS spokesman John Flick took a more relaxed view. "It's great news for consumers. We believe that fair competition is healthy and makes everybody more responsive but our main concern is a level playing field.


"And UPS is concerned about the German Post using public money to its competitive advantage. The point is that the post office shouldn't use profits from its mail monopoly to cross subsidize other businesses where they compete on the open market."


Zumwinkel's press conference remarks seemed to make Flick's point. The Deutsche Post CEO cited the new German postal law adopted early this year which will introduce competition in two stages.


At the same time, Zumwinkel noted that it would "afford Deutsche Post special rights for a transitional period as compensation for its special obligation," meaning that the post office retains a letter monopoly until 2002.


"The new act," he continued, "provides us with a solid foundation for the German postal services market. Now that the stage has been set we will be doubling our efforts in order to expand international service networks. Our aim is to become market leader in Europe."


Since Lufthansa, the German airline, already owns 25 percent of DHL, the Germans will now have a much stronger voice in how the California-based courier carrier is run.


DHL acknowledged as much, saying that "the board of directors will be reinforced by the addition of new representatives of Deutsche Post AG."


The company "will be using the capital proceeds to develop its network in 227 countries and territories. Last year it spent $240 million in infrastructure and technology, and in Europe it plans to open at least 30 new service centers and acquire nine A-300 aircraft.


"In Asia, it is investing in Hong Kong's new Chek Lap Kok airport, a new gateway in Jakarta and a dedicated Asia-Pacific IT center in Malaysia. An airside development is also planned in Sydney," a company statement said.
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