Deutsche Post to Cement European Pole Position After Failed UPS Deal
First Published Monday, 28th January 2013 10:54 am - © 2013 Dow Jones
By Eyk Henning
DAVOS, Switzerland--The failed merger between United Parcel Service Inc. (UPS) and Dutch TNT Express (TNTE.AE), as well as new services, are set to enhance the footprint of Europe's largest postal service company by market share and help compensate for declining revenues from traditional mail services, according to Deutsche Post AG's (DPW.XE) chief executive.
In an interview at the World Economic Forum in Davos, Switzerland, Frank Appel told The Wall Street Journal the company will continue to gain market share in its express delivery unit, DHL, and that it plans to deliver food and household goods in an improved global economic environment.
As the confidence of political and economic leaders meeting in Davos has improved, Mr. Appel said he is "optimistic that the (European and global) economy will improve in the second half of the year."
Commenting on Deutsche Post's DHL ambitions, he said he wants "to further gain market share with its express unit like in the past two years." He added that merger talks between UPS and TNT have unsettled customers, with some of them turning to Deutsche Post.
Logistics industry consultancy Transport Intelligence's calculations show that a combined UPS and TNT would have had 35% of the market for next-day parcel delivery in Europe, behind DHL's 39%, based on 2011 revenue. FedEx Corp. (FDX) has 12% of this segment.
Mr. Appel said he is confident of further strengthening DHL's position in Europe. "TNT will now have to find a standalone strategy" following the failed tie-up, he said.
UPS earlier in January abandoned its plan to buy TNT Express for $6.8 billion, due to objections from the European Commission's competition authorities. Shares of the Dutch company plunged 43% after UPS's announcement.
The regulator was worried the deal would reduce the number of major companies offering both air and ground parcel deliveries in Europe from four to three: DHL, UPS/TNT and FedEx.
Deutsche Post's DHL express unit recorded revenues of 9.4 billion euros ($12.7 billion) in the first nine months of 2012, up nearly 10% from the same period a year earlier.
To further compensate for the annual 2% decline of the traditional mail delivery operations, Mr. Appel said the company is to enter new markets. "We plan to deliver groceries and household products in the whole of Germany by 2016," Mr. Appel said. The company will therefore cooperate with retailers.
Deutsche Post hopes to fill a niche in Germany, where the market share of online grocery is only marginal according to Mr. Appel.
In the U.K., in contrast, the market share of food and grocery bought online is to rise to 6% by 2016, up from slightly less than 4% in 2011, according to research firm IGD.
Deutsche Post also intends to launch a country-wide network of long-distance coaches from 2014 onwards in cooperation with German car driver lobby group ADAC, according to Mr. Appel. The move comes after the German government opened the market for all long-distance routes between cities at the beginning of this year. Previously, the country's state-owned railway operator Deutsche Bahn AG had a monopoly for most routes.
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