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Eesti Post chief: Letter delivery might go to three times per week

Postal workers in southeastern Estonia.
Postal workers in southeastern Estonia. Source: Mirjam Mõttus/ERR

Mart Mägi, head of state postal service Eesti Post, says he is expecting an amendment to the relevant legislation which would transfer a decision on the price of the postal service from the government minister to the Competition Authority (Konkurentsiamet), and would allow the delivery of letters three days a week, instead of the current six days.

Mägi made his remarks in an interview with ERR which follows.

"The universal postal service is not a priority for Estonian residents, and there is no need for a daily service." The author of this sentence is the Ministry of Economic Affairs and Communications. It derives from the explanatory memorandum of that bill which would aim to raise the price of posting a simple letter, from 90 cents to €1.30. Do you also believe that there is really no daily need for a universal postal service?

Letters are no longer sent from person to person each day. Obviously, messages are exchanged on various mobile devices or computers, instead. So the direct need to send a snailmail letter has fallen very dramatically in Estonia. We can see that about 90 percent of the million letters sent per year, are posted at Christmas, namely Christmas cards and Christmas letters.

What do we do with this knowledge?

We can't really assume the universal postal service as dead. After all, a universal postal service does not only constitute a domestic letter. It is also communication with the rest of the world, and only a postal organization can deliver a letter or a small package to quite a few, very distant places.

But in order to send a letter to Namibia let's say, this wouldn't mean a need for an all-Estonian postal network, that works every day.

Mail volumes have fallen by about seven to 10 percent year on year, and of course we have also drawn the network gradually towards a coma.

In Denmark, letters are sent only once a week; in Finland, three times a week (Estonia is more comparable in land area to Denmark than Finland-ed.). Have you understood what is stopping Estonian politicians from altering the requirements of the universal postal service?

Yes, in Estonia it is very clearly stated in the postal law that mail must be distributed six days a week. We really hope that this postal law will also get a renewed form. We have also carried out our research, and the public's expectation is not to receive their letter within 24 hours. In fact, they are prepared to wait 48 hours.

I see that Estonia is hopefully going to switch to the Finnish-style model, after the change in the postal law. One day it would be delivered to one side of the city and another day, to the other side. 

Perhaps in Estonia, it would be optimal to deliver mail three days a week?

Yes, that level of three days a week seems reasonable. Considering Estonians' penchant for periodicals, primarily their reading of magazines and newspapers, we don't see that declining. This also depends on the cultural space.

If delivering letters and parcels goes to three days a week, does delivering periodicals become more expensive as a result?

You could say that. Of course, all types of shipmenta must be viewed holistically. We try to categorize letters, newspapers-magazines, advertising, which is actually a very, very large volume, and also packages. In fact, we've priced them all independently today. If the volumes fall, of course their price levels will increase. But one service does not directly become more expensive at the expense of another.

How many Ekspress Post employees do you want to take on?

Just under 200.

Will their salary rise, compared with what it was?

Our tariff systems were so different that you could say that there would be no significant increase, but the salary is clearly more certain, because as a state-owned company, our salary system is very transparent and very comprehensible.

How much do you pay a postal courier?

Our gross salary is around €1,000 (per month), plus a small performance fee, based on quality performance.

People living in the city and in rural areas pay the same amount for a newspaper. Why does Eesti Post deliver the newspaper to some homes early in the morning, but to others sometime during the day, if it arrives? Why does the state company treat Estonian people unequally in this way?

In fact, it should be noted here that the prices of the service are different in the city and in the countryside. It's just that the state subsidizes home delivery of periodicals [to rural areas] in a significant way. Since otherwise it really would be significantly more expensive compared with the city.

And we have no obligation to deliver early in the morning. If we were to move early in the morning, it means that our people would actually have to start work at 3 a.m., for example, as is the case now in Viljandi. But those people who are willing to come in for night work get a significantly higher salary.

What has a person from Viljandi done to deserve others getting up at 3 a.m. for him or her, which a person from Tõrva has not?

Ultimately, everyone wants to get that morning letter. The question is, how big is the state's or the public's wallet, to pay for that.

Would Eesti Post be able to do things more cheaply if it delivered the newspaper to people in Viljandi, Tartu or Tallinn sometime during the day?

Yes, of course it could be done more cheaply. We have discussed various scenarios with the publishers. Furthermore, the disappearance of the Monday delivery day [for newspapers] was already under discussion with the newspaper association in order to keep the delivery costs low. We have also gone out on a limb to say that yes, this does not happen early in the morning, but later in the day.

Our common interest is that volumes will not fall. From the perspective of both publishers and Eesti Post. And we have found that the time is not there for us to move to a later entry in the urban area.

But what lies ahead?

I can't rule anything in or out. It depends on how fast the digital world is developing. The delivery of newspapers and magazines falls by 10 percent per year, which means that one moment we are faced with the dilemma that home delivery is too expensive, then the next, the question arises whether we will deliver it later.

Once we have done research, many people say that they read a newspaper when they come home from work. And they read it for interest and entertainment, not for news, since news is often read via a smartphone or other device. So it is not to be excluded that newspapers and magazines will still move to afternoon delivery.

What would the price difference be?

If I recall correctly, the price difference would be at the order of 10-20 percent.

Politicians are feverishly looking for places to drag the country into a coma. And among other things, I have heard it said many times the idea that there are services in Estonia that have been staggering along in a similar format since the 1990s, but which are not actually needed in that format. Are there things like this within your services?

As I said at the start, the universal postal service is necessary to deliver to those locations where no one else can. So in this sense, our service is not lagging in any way.

However, the question is whether this service could be provided by the private sector. And here my answer is yes. I think it can. Even today, in fact, a competition for the universal postal service is held every four years.

The postal law, which is a little out of date, tends to present an obstacle. Today, the price of the post is determined by the minister, while in energy, gas, elsewhere it is determined by the regulator, i.e. in cooperation with the Competition Authority. 

And we very much hope that the price of the post in the future will also be in the domain of the Competition Authority, i.e. only fact-based, cost-based. Based on that, this service can be provided by someone who is more efficient. If it is believed that someone can be more effective than us.

Politicians talk, among other things, about the privatization of state-owned enterprises. In your opinion, how much of what is done at Eesti Post is what a state-owned company should in fact do?

The universal postal service makes up 7 percent of our turnover and it is falling. If letter volumes decrease, it will be up to 5 percent. Of course, it must be noted that the total volume of letters is still over a million. This means that it still makes sense to offer this service together with other services. It would be very difficult to separate them.

Perhaps it is not possible to sell only Eesti Post's profitable business?

You can, of course, everything can be chopped up. The concern is that maintaining this 5 percent separately will turn out to be very expensive later on.

Have politicians or ministry officials asked you for advice on what would happen if Eesti Post was sold?

No direct advice has been sought from us about what to do. But I would say that we are not politicians either. However, we have transformed the organization into an increasingly efficient company that would actually suit Estonian pension funds, Estonian investors, so that every Estonian could be a part of our success story.

Since Omniva is no longer Eesti Post and a company that operates in the postal world in Estonia; we are actually a Baltic company. We are as well or even better known than Maxima or airBaltic. Some brand research just came out which revealed that we are the most loved brand in the Baltics. And we actually operate in an even bigger area, starting from Finland. To a very large extent we have been supporting Ukraine, and in Ukraine itself, and indeed in Central Asia as a whole. So our success story is significantly bigger than it is in Estonia.

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Editor: Andrew Whyte, Marko Tooming

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