Email hits Australia Post where it hurts

Reserved letter mailing business makes $67m loss thanks to the Internet

The digital age has hammered Australia Post with the organisation recording a $67 million loss to its reserved letter mailing business in the 2008-09 financial year.

The national mailing service saw a decline of 4.1 per cent in its letter mail business during the year, according to Jim Marshall, chief operating officer at Australia post, and is forecasting a further decline in letter mail volumes of 2.3 per cent per year for the next three years.

Speaking at a senate estimates hearing, Michael McCloskey, corporate secretary at Australia Post confirmed the loss of around $67 million in the 2008-09 financial year.

“The letter business, or the domestic reserved letter service, is actually losing money at the moment. It lost money last year “ he said. “We have increasing costs because the size of the network that we have to service is growing by around two per cent a year, 200,000 extra delivery points a year, and the volumes are declining.”

It was on the basis of this that Australia Post had requested an additional $0.05 price increase to the standard stamp price to start in January 2010, McCloskey said.

Despite this increase, Australia Post is forecasting a loss for the 2009-10 financial year to its mailing business of around $142 million.

Marshall said the organisation had forecast further declines declines in letter volumes in coming years.

“We obviously keep in touch with our global counterparts and they are seeing similar trends going forward and similar trends, if not far worse trends, in their current performance,” he said. “We expect that what we are seeing is the letter product or the letter service starting to go through some structural change in response to the increasing use of digital communication, the internet and so on.”

The committee also heard that Australia Post was suffering a decline in its bill payment business, which had been ongoing for some time as customers moved from over-the-counter bill payments to online channels.

Andrew Wiseman, group manager, Financial and Agency Services, said Telstra’s decision to charge its customers for the use of over-the-counter bill payments had led to the decline.

“We have a number of different scenarios that we have forecast. Our estimate in terms of the impact on our volumes is around 20 per cent of Telstra business volumes. That is simply one scenario we are looking at. It is a very difficult number to predict, of course.”

Australia Post did about 35 million transactions with Telstra in a year, Wiseman said, and expected to see a corresponding decline of 20 per cent in its Telstra bill processing revenues.

A spokesperson for the Internet Industry Association (IIA) said it was difficult to calculate Australia-specific email volumes, but citing a Radicati report on email traffic said in 2009, the typical corporate user sent and received about 167 email messages daily. By 2013 this figure was expected to climb to 219.

Worldwide, email traffic currently totals 247 billion messages per day. By 2013, this figure will almost double to 507 billion messages per day.

The spokesperson said Australia Post should also look to a recent UK report from the House of Commons, Business and Enterprise Committee on securing the future of Post Offices.

"[the report] makes it clear that the future lies in extending to other community services such as banking, ID, bill payments and passport processing. These are a profitable and growing segment for the Australian Post Office," the spokesperson said.

Of particular relevance was the report’s observation that '...we should not underestimate the need for mail services. The internet may be reducing the number of letters sent, but technology has enabled people to set up businesses in remote areas, and increased the demand for packet and parcel services.' the spokesperson said.

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