Czech Post diversifying its business interests in the face of an uncertain future

With the volume of traditional mail severely undermined by electronic communication the Czech Republic’s postal service, Česka Pošta, has seen its profits drop in recent years. Now, newly approved legislation liberalizing the country’s postal services has made matters worse, putting ever greater pressure on Czech Post to expand into new areas of business or bow out.

Photo: Filip JandourekPhoto: Filip Jandourek January 2013 marked the end of an era for Czech Post. In line with a law on the gradual liberalization of the country’s postal services by 2017 it has lost its monopoly on mail weighing less than 50 grams, a considerable amount of the traditional mail that passed through its hands, such as regular bank statements and statements from telephone operators worth 4 billion crowns a month. The change of legislation has left Czech Post stuck with largely unprofitable operations –such as dwindling private mail heavier than 50 grams and deliveries to out-of-the-way rural areas -which it must continue to provide for a 5 year period. Although the law obliges all private postal service providers to pay into a fund that will cover Czech Post’s losses in this field it is obvious that the once unrivaled postal heavyweight is desperately fighting for its future.

Today Česká Pošta has 33,000 employees and operates 3,200 branches around the country with an annual turnover of 20 billion crowns. In 2012 its profits fell year-on-year from 420 to just over 300 million crowns. The company had already moved to minimize losses signing contracts with business partners on the sale of some 270 products –from stuffed animals to pension insurance. Recently it launched a web portal on petrol prices around the country, using its own postal employees on the road to keep the prices constantly updated. At present they are monitoring 500 stations – but gradually the service should cover 2000 stations around the country.

Photo: archive of Radio PraguePhoto: archive of Radio Prague Postal workers are not happy – either those behind the counter or on the road. Most of them have no previous sales experience and do not feel comfortable offering goods that have nothing to do with postal services and those on the road say they have their hands full delivering mail on time and should not have to report on the individual prices of petrol at every petrol station they pass. Česká Pošta’s general director Petr Zatloukal defends the project saying times are changing and the company must seek new ventures.

“Česká Pošta has four and a half thousand cars on the road daily. We monitor the petrol situation for our own use, so providing this extra service is not very time consuming.”

Newly, Czech Post has entered tender processes to operate radar speed systems in several municipalities. This is not something Interior Minister Jan Kubice is happy about, but like other members of the cabinet he understands the need for Czech Post to branch out.

“I must say that I do not in the least like the idea of Czech Post operating radar speed systems. Having said that, I can see why they are seeking to spread out in their business ventures and, as I see it, they really have no choice. At present their contracts with a wide variety of business partners –the 270 or so products they are selling – is bringing in 2 billion crowns a year. Without this money Czech Post would not be able to deliver a single letter or parcel.”

Photo: Michal MalýPhoto: Michal Malý While at present any sales article helps – including stuffed bed-time story characters - Czech Post is looking to a different future. It hopes to profile itself as a provider of IT and communications technology. Among the services it is now providing is a survey of public tenders which might be of interest to its clients. For 200 crowns a month the Czech Post offers clients a list of public tenders selected according to their line of business or the region in which they operate. Miroslava Sčibravá, who heads the project explains:

“We assemble information on public projects around the country – using ministry sources, schools web pages and notice boards, city councils, state companies and so on.”

The public response to this diversification is mixed. Many people who criticized Czech Post when it had a monopoly on postal deliveries for abusing its position say its services are likely to get even worse when it is doing a dozen other things. Others, say that in branching out it should stay closer to home in its field of expertise and build on its traditional services. Chief analyst for Raiffeisenbank, former finance minister Pavel Mertlík explains.

Photo: Filip JandourekPhoto: Filip Jandourek “Generally, traditional post offices are in this situation. Human communication is changing and many of their traditional services are disappearing or are radically decreasing in volume, so I think this is a good orientation. On the other hand, it seems to me that as regards the Czech Post Office there are still many weaknesses in their traditional business and big possibilities for improvement. So I think first they should think about their core business. I will give an example: Czech Post as I see it is very much underutilizing its possibilities in such areas as payment systems. We have a system of payments which can be done via the Czech post office but it is not electronic. They do not have the technology and culture which is usual in banks and particularly young people prefer to work with modern IT technology using things like electronic banking. It would be very easy for Czech Post to introduce also an electronic platform alongside the existing traditional system which they have, similar to electronic banking. Certainly not for banking services per se like taking deposits from clients but for facilitating money transfers and payment services which they are already doing anyway. I think they have a big market potential here which they don’t use and these should be the first steps to take if they want to compete with the rest of the services industry where many new corporations are entering the field, not just traditional banks.”