An Post is facing a serious financial crisis after being informed it will not be granted its request for a 10c hike in the cost of the standard 55c postage stamp.
The Commission for Communications Regulation (ComReg) has signalled it is only prepared to sanction a 3c rise to 58c.
However, ComReg also indicated it might consent to approving an increase to 60c per stamp following a public consultation.
The regulator has warned An Post that it needs to find an additional €43m in cost savings or extra revenue on top of any increase in the price for delivering standard mail, to compensate for its expected losses of €65m in providing a universal postal service in 2012.
ComReg is claiming that, even if it sanctioned An Post’s requested price hikes, it would not address the company’s “cash burn” problems.
The regulator has expressed concern about An Post’s ability to fulfil its role as the provider of a universal postal service amid fears that it could run out of money within two years, on the basis its cash balance fell from €350m in 2008 to €150m at the end of 2011.
An Post lost €50m on its universal postal service last year — a figure which is expected to increase to €65m in 2012.
The state-owned body has argued that it has not raised the price of standard stamps since 2007, despite experiencing a substantial loss of business in recent years.
An Post claims the 10c increase would generate an extra €14m in revenue in a full year, in addition to €8m from a price increase in postal packets approved last May.
However, ComReg noted that this figure of €22m additional revenue — if achieved — would cover just about a third of the current financial losses incurred by An Post as provider of a universal postal service in 2012.
Overall, ComReg has approved 86 out of 93 increases sought for mail under 50g sent as part of its universal postal service.
The regulator claims the prices might be prepared to approve would result in An Post getting 75% of its projected revenue increase of €14m.
ComReg has questioned An Post’s projections that standard mail volumes will continue to decline by only 5% per annum over the coming years, given the increased use of electronic communications.
It has expressed concern the price increases sought by An Post would further accelerate the decline in mail volumes in excess of 5% per annum.
An Post has claimed its financial position has already deteriorated due to delays by ComReg in dealing with its application for a 18% increase in the price of standard stamps which it submitted last February.
However, ComReg claims it was necessary to seek further information on An Post’s latest projections about its worsening financial position since it first applied for a price increase.
ComReg has now begun its public consultation on the price increases.
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