Eesti Post planning to dial back lossmaking mail services business

Omniva (Eesti Post) mailbox and package terminal.
Omniva (Eesti Post) mailbox and package terminal. Source: Siim Lõvi /ERR

The Ministry of Economic Affairs and Communications is planning to relax universal mail service requirements. Should the regulation be changed, it will allow national mail carrier Eesti Post to optimize its unprofitable mail business by, among other measures, closing post offices.

If today, the number of post offices, mailboxes and other things every settlement unit needs to have is fixed, proposals sent out for coordination by the ministry would remove these obligations. Eesti Post would simply have to ensure availability of the mail service.

The universal mail service or delivery of letters and packages to everyone in Estonia is making a loss for the national mail company and is today subsidized based on other activities. CEO of Eesti Post Mart Mägi said that the change would allow the state company to render a lossmaking activity less lossmaking. For example, by closing seldom used post offices.

"It is an optimization task. What makes the mail network unprofitable is often the need to maintain buildings. Heating prices are going up everywhere today. Keeping offices open is another major expense," Mägi said. "Looking at smaller post offices, we may just have to keep them open for two hours a day, while the expenses are there for the full 24 hours."

Postal stations and offices to be closed could be replaced by automated package terminals and home delivery service for customers in remote areas. This would be free of charge for the customer as having to dispatch a courier not too often can be cheaper than maintaining a post office.

"If we can deliver packages to people's doorstep, the price of home delivery is often below that of maintaining a building 24 hours a day. While the number of buildings owned by Eesti Post will fall, postal stations will not disappear and the service will increasingly be offered by our partners with local governments or in shopping malls," Mägi said.

The new regulation could see postal stations in gas stations, community centers or shops, automated package terminals or group mailboxes maintained by the community where Omniva could deliver letters and packages to stand in for post offices.

As concerns package terminals, Mägi said it is important to see them as a part of the main delivery system that grants access to mail services. "We see today that we do not need a permanent manned service station. We need the service to be available 24/7. For people to be able to access their packages or have them delivered," Mägi said.

"We were unable to take package terminals to rural areas. Every time we installed one, the workload of the local post office fell, while it had to remain open nonetheless. Therefore, it was very difficult for us to make the service more accessible. We expect the new regulation to really make the service accessible," the CEO added.

The change could mainly concern rural areas. Managing Director of the Estonian Association of Cities and Rural Municipalities Veikko Luhalaid said that even though the ministry has introduced the proposals, local governments have not formed an opinion yet.

"People stand to lose their jobs, looking at the local government perspective. Every job counts in a small settlement. Whereas we are not talking about very specific work that couldn't be done by a local either. There are a lot of aspects involved. It would be better to have it [post office]. But if it constitutes major loss for Omniva (Eesti Post) and the community mostly needs package delivery services, perhaps alternatives should be considered," Luhalaid said.

"Of course, everyone understands that, abstractly speaking, I will say it is sensible as long as it does not concern the municipality where I live. Package terminals and door-to-door service. But if we are talking about where I live and with some other nuances involved, things can change. Universal interest is one thing and personal interest another," Luhalaid said.

The Estonian Association of Cities and Rural Municipalities plans to shape a position by the second half of December. "That is when I can tell you with confidence where we stand," Luhalaid added.

Eesti Post currently operates 265 post offices, 187 of which in rural areas. The company operates fewer than 100 post offices itself, with the rest operated by partners. Eesti Post has 1,470 mailboxes of which 1,048 are in rural areas. The current regulation states that every local government of at least 2,500 residents needs to have a post office.

Eesti Post statistics suggests that around 80 percent of post office services are handing over packages, even though people prefer to use package terminals. A total of 1.4 million letters are sent in Estonia every year, down from 2.4 million as recently as in 2019.

Eesti Post's universal mail service loss amounted to €2.7 million in 2020 according to the company, up from €2.4 million in 2019.


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Editor: Marcus Turovski

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