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01.11.2019
Latvijas Pasts disagrees with the decision of the Public Utilities Commission (PUC) regarding the net cost of the universal postal service (UPS) in 2018 and points out that PUC should change the UPS obligations imposed on Latvijas Pasts which have been in force since the first decade of the 2000s and which no longer correspond whatsoever to today’s realities either in the postal sector or in the demographic situation or in the ways how postal services are used.
The decision of PUC to refuse to approve the net cost of the universal postal service provided by Latvijas Pasts for 2018 is unjustified, causing losses to Latvijas Pasts and disregarding the current situation in terms of the population numbers, the use of postal services and the development of the postal sector. The obligations imposed on Latvijas Pasts are currently analogous to those contained in the first decision of PUC regarding the provision of the UPS, which were established in 2010 and taken over from the framework of the previously effective Cabinet’s regulations.
“The opinion that Latvijas Pasts must continue to provide the same universal postal service obligations as they were in the first decade of the 2000s is similar to the situation where it would still be instructed to maintain telephone booths on the streets of the city. Virtually everything has changed: the population numbers and the ways how postal services are used, the background of the global development marked by the Fourth Industrial Revolution and the postal sector itself, but Latvijas Pasts is still forced to maintain the postal network that was established based on a fundamentally different political and economic system and does not reflect the contemporary reality whatsoever,” Mārcis Vilcāns, Chairman of the Board of Latvijas Pasts, points out.
This model of obligations prevents Latvijas Pasts from developing the most demanded service segments today and making the necessary investment in them, as a big share of the revenue earned by Latvijas Pasts is spent on maintaining unprofitable post offices and services.
Just like at the beginning of the 2000s, the existing UPS obligations that are currently imposed on Latvijas Pasts provide for maintaining approximately 600 post offices and over 800 letter-boxes. Moreover, ensuring the UPS obligations makes it difficult for Latvijas Pasts to compete in the business segment, as the UPS tariffs are public and known to any private postal operator, which allows such operators to easily win over Latvijas Pasts by offering lower prices when participating in procurements.
The fact that the UPS obligations that are currently in force do not meet the interest of postal operators to provide an efficient service in return for an adequate remuneration is also evidenced by the situation that no private postal operator has applied for the UPS provider tender launched by PUC.
Although Latvijas Pasts has increased its turnover and profits by creating engaging offers in the segments that are attractive to today’s consumers, such as those related to transit, express mail and payment services, as well as cross-border parcel and small packet deliveries, the decline in traditional postal services is demonstrated by the fact that a loss of EUR 1.6 million was caused to Latvijas Pasts in 2018 by the provision of UPS. The main reasons for this are the tariffs that do not correspond to the actual costs of services, the obsolete and outdated structure of services and tariffs and a drop in demand for the services that are no longer relevant for customers.
In this regard, appropriate amendments to the Postal Law were proposed upon the initiative of Latvijas Pasts, after the entry into force of which Latvijas Pasts prepared draft tariff amendments and submitted them to PUC.
The provision of the UPS was also influenced notably by the growth of external costs independent of Latvijas Pasts: rise of the minimum wage, spiralling transport costs due to increase in fuel, OCTA and CASCO insurance prices and increased tariffs of foreign postal establishments to be covered by Latvijas Pasts in trans-national postal service payments.
Provision of the UPS in many European Union countries causes losses to their providers and is compensated in accordance with the requirements laid down in the EU regulatory framework. The latest available data show that the provision of the UPS is supported in Estonia, Lithuania, Poland, Belgium, Greece, Croatia, the United Kingdom and other countries and the amount of this support may even reach tens of millions of euro in some countries.
About SJSC Latvijas Pasts
Latvijas Pasts ensures the widest availability of postal services throughout Latvia by maintaining more than 600 post offices. The primary function of the company is provision of the universal postal service; Latvijas Pasts also provides commercial transport, express mail, payment, press subscription, retail and philatelic services. Latvijas Pasts is a wholly State-owned company with around 3,800 employees. The quality measurements of Latvijas Pasts domestic mail deliveries are regularly conducted by Kantar TNS, one of the leading market, social and media research agencies in Latvia. In turn, the quality measurements of the cross-border deliveries are provided within the framework of the International Post Corporation through the intermediary of the research companies Kantar TNS, Ipsos and Quotas.
Additional information:
Gundega Vārpa | Head of External Communications
Phone: +371 67608505
E-mail: pr@pasts.lv; gundega.varpa@pasts.lv
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