country sheet: spain - circabc · country sheet: spain 1.1 summary mail market characteristics ......

Country sheet: Spain 873

Country sheet: Spain

1.1 Summary

Mail market characteristics

The following characteristics are important for the dynamics in the Spanish mail market:

(i) Spain is the second largest country in the EU with a relatively low population density unequally

distributed over the country;

(ii) Domestic intra-city mail is not part of the reserved area, and in addition, there are no bulk mail

arrangements, which de facto means that direct mail is liberalised (both inbound and outbound

cross-border mail less than 50g are however part of the reserved area);

(iii) The VAT exemption of Correos is limited to the reserved services, implying that there is – in this

respect – a level playing field in the liberalised part of the market.

Regulatory development

• According to postal directive 2002/39/EC, the reserved area was reduced from 100g to 50g as from 1 January 2006. In November 2006, a Royal Decree (Real Decreto 1298/2006) was passed providing for procedure for dispute resolution among operators and providing regulation for access to the NPO’s (Correos y Telégrafos) postal facilities by other authorised postal operators. However it was not until May 2007 that Government approval was given.

• The Decree stipulates that only those postal operators with sole administrative

authorisation to provide postal services included within the scope of the universal postal service may access the public postal system managed by Correos. Given the recent imposition on the NPO of a mandatory access regime, the NRA has stated that it is unlikely that further liberalisation will take place in advance of full market opening on 31 December 2010.

• More recently there has been an amendment to the Royal Decree 1829/1999, Article

37, which now provides for Correos not to deliver to the door in special circumstances.

Market developments

• Historically, the combination of the relatively low quality of service performance by Correos and the fact that domestic intra-city mail is not part of the reserved area has given rise to the emergence of a large number of small local and sometimes regional competitors. As at June 2008, 532 licenses were granted to postal operators offering services within the universal service. Founded in 2001, Unipost has become the main competitor of Correos comprising a network of the 19 main competitors in Spain.

Annex II: Main Developments in the Postal Sector (2006-2008) 874

Unipost reported 70% national coverage in 2004 and has an ambition to reach 100% national coverage in 2009. DPWN1 acquired a 38% stake in Unipost in 2004.

• Correos has invested into improving their QoS performance with good results,

although in 2006 not all QoS thresholds were met. Furthermore, Correos has stated that it intends creating higher value added products and intends to open up new channels for marketing in response to the challenges posed by electronic media. The parent company’s strategy for the online market is to design a specific range of innovative high-tech services on the one hand, and, on the other, to offer conventional postal products that have been adapted to the new technological tools.

• The NRA estimates that near 60% of the letter market is open to competition, but that

the NPO retains 93.7% of this market (individual item mail). ECORYS estimates the total market share of CPOs in the addressed mail market at 10-12%.

• The postal market appears to be still growing, both in terms of letter mail and express

services. However, the NPO reports that in recent years growth in mail volume has slowed down. Stagnation is foreseen in the short-term and a slight decline of volumes in the mid-term, possibly due to electronic substitution.

• In 2006, Correos joined the Kahala Postal Group, composed of the national postal

operators in USA, China, Japan, Australia, Hong Kong, Korea, UK and in 2007, France. The objective was to face the increasing pressure from international integrators and to offer express parcel services of high quality.

Other issues

• Correos receives state funding towards the accounting cost of the USO, which is disclosed within its statutory accounts (see table below).

• The NPO is heavily unionised and over the years there have been a number of

disputes. The recent changing of the USO delivery requirement (that is to no longer have to deliver to the door) to homes more that 250m away from a main road may lead to further unrest as the union estimates that at least 400 jobs in the region most affected may be lost.

• However, the NRA is of the view that delivery requirements are in fact not relaxed

and that the USO in its entirety will be better served by providing better guarantees of delivery.

Discussion points

• ECORYS notes that the development of competition in local postal markets can be attributed to the relatively low level of service quality provided by the NPO, though would not have been possible if intra-city mail was not liberalised. Consequently, the developments in Spain provide evidence for the fact that customers switch between postal operators as a result of differences in service quality.

1 Deutsche Post World Net


• The change in the universal service obligation in Spain, according to which Correos is no longer obliged to deliver to houses that are more than 250 metres from a main road, provide evidence that USO regulations should allow diversification in scope, taking geographic information into account.

Summary information on market developments:

Postal market segment / aspect Competition (market shares) Main competitors / remarks

Express Competitive Many

Parcel (main players) Competitive Many

Unaddressed Competitive Many

Cross border mail No information

Addressed mail (market share CPOs)* 10-12% ECORYS estimate. The figure for

Unipost alone is 8.2%.

Population density (inhabitants/km2) 87

Total addressed mail market (items) 6.2 billion items

Addressed mail volume per capita 141

Status of NPO State enterprise

Main divisions of NPO Mail, parcels, express, counter

and financial services

Note: * The market share of CPOs refers to the combined market share of CPOs in domestic addressed mail

delivery, excluding newspaper delivery. All figures refer to 2007. Note that accurate data on the combined

market share of CPOs are not available, as no mail volume data are known for the many local postal operators.

Summary information on the implementation of the Postal Directive:

Aspect Implementation and remarks

Universal service and its

financing

The NRA has a fairly broad definition of the USO being defined as an ensemble of

postal services of a determined quality, permanently available throughout Spain at

affordable prices. Recently, the Government has given Correos the permission to

abandon deliveries to homes that are more than 250 metres from a main road.

The NRA reported that in 2005 the “cost” of the USO was 221 million euro and the

state provided funding of 91 million euro or 41% of the cost. In 2006, the budget

allocation of the government totalled € 93m and in 2007 the figure earmarked to

the postal service amounted to € 95m.

Reserved area The Spanish postal market is already liberalised to a greater extent than most

other EU Member States: domestic intra-city mail is not part of the reserved area

and direct mail delivery has always been open to competition. The delivery of items

of correspondence with a weight level of less than 50 grams and less than two and

a half times the basic tariff is still reserved for intercity mail and cross border mail.

Licensing and network

access

The NRA issues both Singular Administrative Authorisations and General

Administrative Authorisations (to offer postal services that are not included in the

sphere of the universal service). There are two types of service in each category,

(i) urban areas and (ii) urban and international areas.

In 2007, a mandatory access regime has been imposed on Correos.

Tariff principles and

transparency of accounts

With regards to the reserved area, any price changes must be authorised by the

NRA, whilst in terms of the non-reserved USO area, the NRA reserves the right to


Aspect Implementation and remarks

set maximum prices, although, to date, it has not done so. For those services that

are non-reserved, non-USO the NPO is free to set prices within market conditions.

Regulatory accounts are produced for the NRA but not published publicly in detail

Quality of services The NRA sets standards in accordance with the Postal Directive and the NPO

publishes results within its annual report. The results are presented in two forms,

one of internal measurement and one using external services, which appears to be

in conformance to CEN standards

The national regulatory

authority

The NRA will be the National Postal Sector Commission whose main powers are

managing the registry of postal operators data collection, setting QoS targets,

conflict resolution, access conditions, establishing net cost of the USO inspection

and control over the postal market and checking the regulatory accounts. Currently

these responsibilities are with the Ministerio de Formento which also has

responsibilities for postal and telegraphic services, postal service policies,

authorising postal prices within the reserved area and international postal issues.

40 staff deal with postal affairs

1.2 General information

According to the World Bank, Spain's economy is the ninth largest worldwide and the fifth largest in Europe. As of 2006, absolute GDP was valued at $1.084 trillion according to the CIA Factbook. The per capita PPP (GDP) is estimated at $27,400 (2006), trailing the major industrialized nations of the G7 and placing Spain at 13th in the European Union. With an area of approximately 505,992 km², Spain is the second largest country in the EU (behind France) and high plateaus and mountain ranges dominate its mainland. Spain's population density, at 86.7/km², is lower than that of most Western European countries and its distribution along the country is very unequal. With the exception of the region surrounding the capital, Madrid, the most populated areas lie around the coast. The above makes the provision of the USO a potentially expensive commitment and recently the NRA has allowed a change in delivery requirements to lessen the burden on the NPO.

Table 0.1 General country information (2007)

Spain

Population (in million) 43.9*

Size of the country (1,000 km2) 506.0*

Population density (inhabitants/km2) 86.7*

Degree of urbanisation 76.7**

Number (and percentage) of inhabitants 5 largest cities 7.1 million (16%)***

Sources: * UPU (2006), ** UN (2005), *** World Gazetteer (2008 estimation).


1.3 Regulatory developments

1.3.1 Postal law and regulation

The Postal Directives 97/67/EC and 2002/39/EC are incorporated into Spanish Law through the Act 24/1998, of 13 July 1998 amended on the 30 December 2002. In accordance with the contents of the above Law, the Ministerio de Fomento (Ministry of Public Works and Transport) is in charge of postal regulation. It manages this function through the postal regulatory body, the Postal Services Regulation Bureau, part of the aforementioned Subsecretariat of Public Works and Transport, as legislated for in the Real Decreto 1476/2004, of 18 June 2004. The regulatory framework in Spain diverges in several ways from the European framework. Domestic intra-city postal items are not part of the reserved area (already for more than hundred years), and in addition, there are no bulk mail arrangements, which de facto means that direct mail is liberalised. Large customers may qualify for special commercial agreements on all these items if the number of items when deposited with Correos y Telégrafos is over 500 pieces. In November 2006, Real Decreto 1298/2006 was passed providing for procedure for dispute resolution among operators and providing regulation for access to the NPO’s postal facilities by other authorized postal operators. However it was not until May 2007 that Government approval was given (see Annex 1 for extracts and the Correos press release). More recently there has been an amendment to the Royal Decree 1829/1999, Article 37, which now provides for the NPO not to deliver to the door in special circumstances.

Table 0.2 Postal law and regulation

Postal law and

regulation

Date of introduction Date of latest

amendment

Remarks

Ley 24/1998, del Servicio

Postal Universal y de

Liberalización de los

Servicios Postales

13 July 1998 30 December 2002 Law 24/1998, of the

Universal Postal Service

and Liberalization of the

Postal Services

Royal Decree 1829/1999

Reglamento de

Prestación de los

Servicios Postales

3 December 1999 R.D. 503/2007 of 20 of

April of 2007

Regulation of Benefit of

the Postal Services

Real Decreto 1476/2004 18 June 2004 The organization of the

Ministerial Department

(Ministry of Public Works

and the Economy) like

person in charge of the

trusteeship of the postal


Postal law and

regulation

Date of introduction Date of latest

amendment

Remarks

sector.

Real Decreto 1298/2006

de 10 de noviembre por el

que se regula el acceso a

la red postal pública y se

determina el

procedimiento de

resolucion de conflictos

entre operadores

10 November 2006 To encourage effective

competition and enhanced

services, the new

regulation creates a

procedure for dispute

resolution among

operators and it regulates

the access to the public

postal system

Ley 23/2007, de 8 de

octubre de creación de la

Comisión Nacional del

Sector Postal

10th October 2007 Creation of the National

Commission of the Postal

Sector as well as to

modify Law 24/1998 in

relation to the system of

authorizations

Resolución de 23 de abril

de 2007 de la

Subsecretaría por la que

se aprueban las

condiciones de referencia

provisionales para el

acceso a la red postal

pública

24th May 2007 Resolution of 23 of April of

2007 of the

Undersecretary's office by

which the provisional

conditions of reference for

the access are approved

to public the postal

system

Source: Ministerio de Fomento.

1.3.2 Universal Service Obligation

The NRA has a fairly broad definition of the USO on its website “this being defined as an ensemble of postal services of a determined quality, permanently available throughout Spain at affordable prices.”

However, Correos have the following definition which is consistent with the requirements as set out in Article 15 Law 24/1998, 13th July Universal Postal Services and Postal Service Liberalisation:2: The universal services provided include:

1. Money order services; 2. The provision of standard national and international postal services. This includes

cards and letters up to 2kg or packages, with or without commercial value, of up to 10kg;

2 Source – Correos web site.


3. National and international deliveries of advertising material, books, catalogues, periodicals and other items which can be freely circulated are accepted by the universal postal service as long as they are carried out in an acceptable manner;

4. The provision of services accompanied by a certificate and of stated value. Only the operator charged with the provision of a universal postal service can provide the following services:

1. Money order service; 2. The collection, admission, classification, processing, circulation, transport,

distribution and delivery of long distance letters and cards, whether certified or not, of up to 100g as of 1 January 2003 and 50g as of 1 January 2006. These limits do not apply as of 1 January 2003 if the price is equal to or more than three times the public rate for first class delivery of a letter in the first weight category and as of 1 January 2006 if the price is equal to or more than two and a half times that price;

3. International postal service for entry or exit of letters and cards with the same weight and price limits as in the previous paragraph;

4. The acceptance, as a postal service, of requests, documents and communications that members of the public send to Public Administrative Bodies;

5. The right to deliver communications from administrative and legal bodies where proof of delivery is required;

6. Establishment of post office boxes for the delivery of correspondence; 7. Customs clearance options; 8. The distribution of stamps and other means of postage; 9. Exclusive use of the terms “Correos” and “España” or any other term which

identifies the operator to whom universal postal service is entrusted. Articles for the blind are accommodated within the above through Articles 15.2 and 15.3 of the Law 24/1998.3 The USO collection and delivery is five days per week although in provincial capitals this may be six days, or two newspaper deliveries on some days. The USO operator has a separate obligation to manage and operate the public postal system, which will either be through fixed offices or mobile services for remote locations. Change to delivery requirements

However, as previously mentioned there has been a change to the requirements of Correos in terms of the USO provision on delivery. This was arranged through Royal Decree 503/2007, of 20 April that modifies Article 45 of Real Decree 1829/1999 regarding the terms of expedition.

“[…] The Spanish post office, Correos, is to stop home deliveries in isolated areas. […] Under the new

regulations Correos will no longer be obliged to deliver to houses that are more than 250 metres from a

main road. The rural areas of Galicia are expected to be those most affected by the move. According to

the 2001 census, some 445,000 people in the region could thus lose their postal delivery service.

3 Source – ECORYS questionnaire to the Ministerio de Fomento.


Correos suggests that in such areas the homeowners collect their post from a community letterbox

which Correos will locate at a place decided in agreement with the local town hall and neighbourhood

associations.”4

The NRA however provided a different perspective and stated that, based on the information they have collected the actual impact on those homeowners and business will be insignificant as compared to the service they were previously receiving:

These requirements are not relaxed. On the contrary, the objective is to identify the necessary

conditions whereby home/commercial deliveries can be replaced by alternative delivery methods. In the

previous legislation these alternative methods were very vaguely described, which caused confusion

and triggered a number of disputes.

The Royal Decree 503/2007 does certainly not represent a cut back on services to the end user. What it

aims to do is provide a universal service with a greater guarantee of delivery, including in rural and

remote areas.

Therefore, postal services in Galicia are taking place regularly, with no intention to reduce the means by

which 'Correos' provides these services. The plan is to actually adapt these to the new set of needs the

new piece of legislation has originated.

The specifics are as follows.

Article 37: “Delivery of postal mailing in special environments, under special circumstances or

exceptional conditions”

In the case of special circumstances, which will be defined in this article, the delivery of ordinary mail

will be carried out via individual mailboxes, which are not situated at the individuals’ homes, or via non-

individual mailboxes, which hold the mail of multiple homes.

From now on the articles of the regulation are written as follows:

- The delivery will occur on all working days, 5 days a week. Any postal operator may make use of the

delivery systems mentioned above.

‘Special Circumstances’ apply to the following situations:

(a) Isolated houses or homes that are situated in environments characterized as dispersed, which are

placed more than 250 meters from the public road, which is used by anyone of the public service sector.

The distribution will be realized at individual mailboxes or group mailboxes, which are located between

the housings and the route of circulation.

(b) Environments under large construction and with minimal population density. Constructions refer to

horizontal construction buildings that are grouped or individual houses, industrial buildings or any other

type of individualized construction.

Under the above-mentioned circumstances the mail distribution is realised via file cabinets, which hold

the mail of multiple homes, if at least two of the following conditions applies:

1. The number of inhabitants is equal or lower to 25 inhabitants per hectare;

2. The number of houses or buildings is equal or lower to 10 per hectare;

4 Source – Publication – “TypicallySpanish”.


3. The average volume of dispatches per house in a week does not exceed 5 (computed annually).

(c) Other ‘special environments’ include:

1. Markets, commercial centres and services. This specification includes all environments

characterized by an independent concentration of establishments, which have a commercial character

or service;

2. Residential real estate establishments, which are characterized as single-family housings, with only

one police number and without any individualized official identification of each one of the houses, or

industrial areas. These are attached, detached or semi-detached houses normally grouped in a closed-

off area, Each house is not registered on its own but, rather, the official identification comes as a group

of houses. These are exceptional cases.

In case of environments under new construction, where it is not possible to determine any of the

previous conditions, a provisional distribution system will be adopted. Under this system the area will be

treated the same way as comparable areas of the zone. The systems will be adopted with a maximum

term of two years.

3. Individualized official identification, as well as, industrial areas, whose buildings have only one

police number and no official individual identification.

In both cases the distribution takes place via file cabinets, which hold the mail of multiple homes. In the

second case this procedure has to be explicitly authorized by the national postal regulator.5

Cost of the USO

In terms of the “cost of the USO” it does not appear that there have been any economic assessments and that the value is derived from the regulatory accounts. The Ministry made the following statement:

The Government allocated 91,049,620 EUR in the 2005 Budget to the universal postal service. In 2006,

the budget allocation totalled 92,871,370 EUR. In 2007 the figure earmarked to the postal service

amounted to 94.728.800 EUR.

There are currently no other funding streams towards the cost of the public postal services.

When it comes to preparing the draft Budget the Regulator ignores the actual figures which relate to the

ongoing budget. The budgeting comes as an advance payment towards the final bill which will be

agreed once the actual cost of running the universal postal service is determined at the end of each

fiscal year. The Ministerio de Fomento clears the balance between the actual and the estimate cost of

the service.

Also, the following is included within the NPO’s consolidated financial statements:

“Note 5n - Capital contributions

Non-refundable capital contributions received by the Parent Company for the provision of the universal

postal service are stated on the liabilities side of the balance sheet at the original contributed amount,

5 Source: translated by ECORYS from http://www.boe.es/boe/dias/2007/05/09/pdfs/A19902-19905.pdf.


net of imputations to results, using a straight-line method over a period equivalent to the lifetime of the

fixed assets funded by the contributions. […]

Operating contributions received by the Parent Company for provision of the universal postal service

are recorded as revenues on the profit and loss account in the period for which they were granted.

Operating Revenue 2005 2006

Government contributions (note 21) 2,125k euro 1,945k euro

Note 21

This item chiefly reflects 1,033,000 euro of government contributions received under the Ley de

Presupuestos Generales del Estado de 2006 (‘the Budget Act 2006’) for the provision of the universal

postal service by the Parent Company in 2006 (see note 5(n)), and other contributions in respect of

various items.”6

Therefore it would appear from the above that the NPO has received a state subsidy in 2005, 2006 and 2007 towards the cost of the USO covering all postal services within the USO including letter weighing up to 2kg, postal parcel weighing up to 2kg and money orders. With regard to funding the USO in the future, Correos made the following statement in its 2006 Annual Report: “Other challenges faced by the Group include the upcoming changes to the way the universal postal service is funded,” although to date, no details of what the changes are have been made available. The NRA reported that in 2005 the “cost” of the USO was 221 million euro and the state provided funding of 91 million euro or 41% of the cost.

6 Source: consolidated annual financial statements of the Correos Group.


1.3.3 Reserved area

Table 0.3 Liberalisation of postal services and the reserved area (2008)

Postal product Within reserved area

(Yes, no, partially or unclear)

Remarks

Bulk mail and consolidation

(addressed)

Partially Except for items above 50g, local

mail and direct mail

B2B non-bulk mail Partially Except for items above 50g, local


Individual item mail Partially Except for items above 50g, local


Cross border mail Partially Except for inbound and outbound

items above 50g

Unaddressed mail No

Parcel mail No

Express mail No


The Spanish postal market is already liberalised to a greater extent than most other Member States in that domestic intra-city mail is not part of the reserved area (already for more than 100 years) and “direct mail” delivery has always been open to competition. The delivery of items of correspondence with a weight level of less than 50 grams and less than two and a half times the basic tariff is still reserved for intercity mail and cross border mail and the delivery of value-added services and document exchange is liberalised in line with the postal directives. Given the recent imposition on the NPO of a mandatory access regime the NRA has stated that there are unlikely to be any further steps and that full market opening will be accomplished by 31 December 2010.

1.3.4 NRA

The NRA is the Ministerio de Fomento, Servicios Postales Subdirección General Regulación Servicios Postales (the Ministry of Public Works and Transport, Postal Services Regulation Bureau; in short Ministerio de Fomento). Role of the NRA

The role of the NRA is defined as follows:

“In accordance with the contents of said Law, the Ministry of Public Works and Transport is in charge of

postal regulation. Therefore, it is up to the Subsecretariat of Public Works and Transport to ensure a

universal postal service – this being defined as an ensemble of postal services of a determined quality,

permanently available throughout Spain at affordable prices. It should also guarantee the meeting of

norms regulating the functioning of the postal market. These functions are exercised by the postal


regulatory body, the Postal Services Regulation Bureau, part of the aforementioned Subsecretariat of

Public Works and Transport, as envisaged in Real Decreto 1476/2004, of 18 June.”7

However the Law 23/2007, of 8th October, has created the National Commission of the Postal Sector and established its financing and operating conditions. At the present time it has yet to constitute itself and to enter operation, however when it does it will be responsible for managing the registry of postal operators, processing user claims, conflict resolution and arbitration between operators, determining access conditions to the public postal network, determining the net cost of the universal postal service, managing the operating taxes of the National Commission, drawing up guidelines for the various operators, inspection and control function over the postal market, acting as a watchdog on access conditions and overall quality standards. The NRA has a formal relationship with the Spanish competition commission (National Commission of the Competition) and will refer matters to it if it believes a decision will affect competition conditions.

Table 0.4 Regulatory powers NRA

Powers Yes/No/Unclear Remarks

Require data from USP Yes Jointly with the National Commission of the

Postal Sector

Require accounting system Yes Jointly with the National Commission of the

Postal Sector

Require new data studies Yes Jointly with the National Commission of the

Postal Sector

Cancel unlawful rates No Tariffs are controlled ex ante

Levy Fines No This will be the responsibility of the National

Commission of the Postal Sector

Seek judicial order Yes Jointly with the National Commission of the

Postal Sector

Set new rates for USP Yes

Require downstream access Yes But note that this is the responsibility of the

National Commission of the Postal Sector and

has been arranged by means of a Royal

Decree

Require data from non-USPs Yes Jointly with the National Commission of the

Postal Sector


The above table represents the powers of the Ministry and as can be seen some of the powers will be with the Commission once it has been established.

7 Source: Ministerio de Fomento website.


The Ministry provided the following clarification:

The following functions are under the auspices of the Ministerio de Fomento (the Ministry is in charge of

the postal sector):

• The organisation and management of all postal and telegraphic services;

• Proposing to Government ways to develop postal service policies and securing its delivery;

• Authorising prices for those services exclusively provided by the Postal Services (Correos y

Telégrafos);

• Proposing, in coordination with the Ministry of Foreign Affairs, the policy to follow with regards

international postal organisations and with regards the relationship these have with national

organisations, especially when it comes to international postal communications.

The rest of regulatory functions within the postal sector will fall under the National Postal Sector

Commission (postal service regulatory body). All these functions are currently undertaken by the

Ministerio de Fomento until the National Postal Sector Commission come into force.

Staffing and funding of the NRA

In terms of the annual budget for the NRA and the number of staff employed, the following was provided:8

The Department to which the exercise of the functions in postal matter corresponds is at the moment

the General Subdivision of Regulation of Postal Services of the Ministry of Public Works and the

Economy (in as much the National Commission of the Postal Sector is constituted, by virtue of Law

23/2007, that will assume part of the present competitions of the Subdivision).

The present group of personnel is forty (40) people, all of them personal civil employee. As it leaves

from the organisational structure of the Ministry of Public Works and the Economy, the cost of its

operation is a public cost funded from the General State Budget. This is the situation until the present

day.

Correos does not provide any funding towards the cost of the NRA.

1.3.5 Complaints and redress procedures

The NRA deals with claims and complaints in relation to those services within the USO, Also to solve controversies raised between different postal operators and to determine conditions of access to the network in case of conflict between postal operators.

1.3.6 Licenses

The General Register of Postal Services Companies was created by Act 24/1998 of 13 July 1998, and deals with the regulation of the universal postal service and the liberalisation of postal services.9

8 Source: ECORYS questionnaire to Ministerio de Fomento.


Royal Decree 81/1999 of 22 January 1999 ratifies the development of regulation, and Title II of said Act concerns the authorisation of companies offering postal services and allows for the General Registry of Postal Services Companies. Registered details are freely accessible for interested parties, so long as this complies with the specifications contained in Act 15/99 of 13 December 1999, concerning personal data protection. The purpose of the General Register of Postal Services Companies is:

a. The granting of General Administrative Authorisations; b. The granting of Singular Administrative Authorisations; c. Modifications to the existing details relative to prior authorisations, as

well as those derived from periodic updating of registrations; d. Granting of the corresponding registration certificates; e. Cancellation of registrations, by request or due to termination of

professional activity. General administrative authorisation

The General Administrative Authorisation is required in order to offer postal services that are not included in the sphere of the universal postal service. They comprise the following categories- Mail with added value; • Postal packages between 10 and 20 kg; • Addressed advertising mail (in a different category from letters, postcards or

packages); • Books, periodical publications and catalogues (in a different category from letters,

postcards or packages). Singular administrative authorisation

The Singular Administrative Authorisation is required to offer postal services included in the sphere of the universal postal service, which are not limited to the operator charged with their execution. They comprise the following categories: • Letters and postcards up to 2 kg; • Packages up to 10 kg.

Types of services

There are two types of service in each category: • Urban area; • Urban and international areas.

Each type of singular authorisation allows for the collection, admission, classification, treatment, processing, transport, distribution and delivery of the corresponding mail.

9 Source – This section is based on information form Ministerio de Fomento.


Table 0.5 Entry regulations

Instrument Services allowed

under the license

Conditions for obtaining the licence Number of

licences

approved (2008)

Specific

Authorisation

Services included in the

USO area

Respect the reserved area

Registration in the Post Operator’s Register

Tax payment at time of registration, but no annual

renovations (Quantity depends on the service

authorization. Maximum 1,380 euro

Respect the privacy of the correspondence and

personal data

Information duties - very limited in practice-: (price

communication, service offer complaint procedures,

information requirements of NRA)

532 at June

2008

General

Authorisation

Services not included in

the USO area

Respect the reserved area

Registration in the Post Operator’s Register

Respect the privacy of the correspondence and the

personal data

2,056 June

2008


Correos operates under both forms of authorisation.

1.3.7 Access

Table 0.6 Network access

Upstream/downstream Form of access Regulated?

(Yes, No, Unclear)

Upstream Access to street letterboxes No

Access to outward sorting centres Yes

Downstream Access to inward sorting centres Yes

Access to delivery offices Yes

Access to PO boxes Yes


Recently a mandatory access regime has been included in the regulatory framework in Spain. A new law passed on 17 November 2006 states that public postal infrastructures must be shared with the private postal companies. The trade union CCOO has presented a


report to the Supreme Court against this new law due to its potential negative impact on the public limited company Correos and the subsequent job losses.10 The NRA provided the following statement in July 2008.

The appeal by the Trade Union 'Comisiones Obreras' in Spain was fully rejected by the Supreme

Court in the sentenced passed on 3 June 2008. Not only formal and content aspects were rejected,

but the sentence also highlighted that the economic viability of the Postal Office did not depend on the

challenged Royal Decree itself, but rather on the success of it corporate strategy. One should bear in

mind that the environment is increasingly liberalised and the Postal Office will have to carefully design

its corporate strategy around that. Its methodology when it comes to applying prices and tariffs will

have to take into account that access to the network is based on bilateral agreements where access

prices need to be negotiated.

Law 23/2007 of 8 October 2007 created by the National Commission of the Postal Sector and Resolution of 23 April 2007 from the Undersecretary's office confirms the provisional conditions for access to the public postal system. The subsequent Royal Decree approved by the Government on 10 November 2006, at the suggestion of the Ministry of Public Works, regulates access to the public postal system by the postal operators. This Royal Decree establishes that: Only those postal operators with sole administrative authorisation to provide postal services included within the scope of the universal postal service may access the public postal system managed by Correos; • The Public Operator, by Law, continues to provide postal services, amongst others,

for interurban deliveries of less than 50g, which it must still carry out until the postal services are fully deregulated in Europe;

• Access to the System shall be definitive, until the postal deliveries have been completed. Therefore, once access has been granted to the public system, Correos and its workers shall be responsible for the different tasks (classification, as appropriate, transport, delivery…) through final delivery to the recipient.

Access prices and conditions

The terms and conditions should be negotiated between the postal operator seeking access and Correos, taking into account the (general) stipulations in the Royal Decree 1298/2006. The rule for the access price is that it will be calculated based on the volume of the dispatches and the cost avoided by the operator (see Annex I for further detail). The NRA added the following comments,

Transparency in the mechanisms used to set access prices to the public postal network is assured as

any operator gaining access to the network will pay the same tariff to any other operator under similar

access conditions.

The price is set under the 'retail minus' mechanism' which consists in applying certain discounts to the

service price depending on cost savings.

10 Source - European Foundation for the Improvement of Living and Working Conditions 2007.


Cost savings are mainly determined by postal classifications, destination, depot location, annual postal

transit and the frequency of collection. Baseline conditions to access the postal network are described in

Resolution 23 April 2007 by the Ministerio de Fomento published in the BOE (the Country's Official

Journal) on 4th May 2007.

According to the Royal Decree 1298/2006 which regulates access, any access agreements will be

communicated to the Sub-Directorate General Regulation of Postal Services at the Ministerio de

Fomento, within 15 days following its entry into force. The Sub-Directorate General will ensure data

confidentiality on of commercial and industrial property grounds.

The NRA further added that it is up to the parties to the access agreements to negotiate the terms and that the NRA can only set prices and conditions when they fail to agree. Access agreements

Correos and Cartes Lleida SL signed the first agreement for access to the public postal system in July 2007. The agreement contains several requirements that Cartes Lleida must fulfil to access the Correos network, taking into account the transparency, objectivity and non-discrimination guarantees demanded by the current Postal Act and the reference conditions approved by the Under-secretary for Public Works in the Resolution dated 23 April 2007. Correos signed the second public postal network access agreement with the private postal operator Norcorreo S.L in January 2008. Norcorreo S.L headquarters are in Torrejón de Ardoz and it provides services in the Madrid region.

The NPO is believed to be involved in advanced negotiations to reach similar agreements with other postal operators in the Spanish market.

1.3.8 Price regulation

The NRA has authority in two areas of the NPO’s pricing. With regards to the reserved area, any price changes must be authorised by the Ministerio de Fomento, whilst in terms of the non-reserved USO area, the Ministerio de Fomento reserves the right to set maximum prices, although, to date, it has not done so. For those services that are non-reserved, non-USO the NPO is free to set prices within market conditions. In terms of the reserved area, the NRA has confirmed that the NPO is required to provide cost data in support of any request for price changes. Any price rise for the reserved area has to be justified by substantiated cost data providing evidence that costs have moved in a similar manner to that of the planned price increase, although other factors are taken into account including the expected increase in the Consumer Price Index and/or affordability.


Transparency of accounts

Correos prepares Regulatory Accounts, but these are not published in detail.

“The calculations are based on the accounting of costs developed by the public operator according to

the norms dictated by this Ministry in Ministerial order 2447/2004. The accounting is audited by an

external auditor contracted by the Ministry and applies the methodology developed by Nacional

Economic Research Associates (NERA) for the DGXIII of the European Commission on the Universal

Postal Service in the European Union to obtain the cost of the Universal Service.

Law 24/1998 establishes the obligatory nature to establish separated accounts, as a minimum for each

of the reserved services and the services that are non-reserved, establishing within the services that are

non-reserved a clear distinction between the services that comprise the universal postal service and

those that are not.

Ministerial order FOM/2447/2004, of 12 July 2004, on the analytical accounting and the separation of

accounts of the postal operators, determines that each one of the services of the reserved scope must

be detailed in the accounts; the universal services must as a minimum be separated into six groups that

appear in detail and the non-universal services can appear with a total cost for the set.”.11

In terms of costing policies, the NPO has confirmed that they fully comply with the European and national regulations and that the cost accounts are fully audited. The NPO publishes its financial accounts, but does not provide any detail within them with regards to the detail contained within the Regulatory Accounts. A note to the accounts provides information on funds received from the Government with regards to the financing of the USO.

1.3.9 Quality of service

QoS standards and performance figures are given in Table 1.7. The NRA sets standards in accordance with the postal directives and the NPO publishes results within its annual report. The results are presented in two forms, one of internal measurement and one using external services, which appears to be in conformance to CEN standards. The NPO reports that the percentage of lost mail is “so small that can be negligible, therefore it can’t be measured.”12

11 Source – ECORYS questionnaire to Ministerio de Fomento. 12 Source – ECORYS questionnaire to Correos.


Table 0.7 Quality of service USP – 2006

Standard Threshold Performance USP Remarks

D + 1 No target found 56.1 Improvement of 7.7 points

on 2005

[% of lost mail]

D + 3

D + 5

93.0

99.0

89.9 Improvement of 1.6 points

on 2005

D + 3 Parcels to 10kg

D + 5

80.0

95.0

No externally

measured results

found

International Inbound D + 1 No target found 80.5 Decrease of 0.7 points on

2005

International Outbound D + 1 No target found 93.2 Improvement of 18.1

points on 2005

International Inbound D + 3 85.0 87.7 Improvement of 1.6 points

on 2005

International Outbound D + 3 85.0 93.2 Improvement of 1.1 points

on 2005

Source: RD 503_2007 Reglamento Postal mod A19902-19905 & Correos 2006 Annual Report.

“The internal audit process, despite being firmly established and covering a very large sample size,

does not reflect the entire postal process. Correos therefore commissions an outside study to

complement its internal measurements. The outside study, called SPEX uses external panellists to look

at quality from deposit to actual delivery of an item. The results give a more realistic picture, because

they more closely reflect public perceptions and encompass the entire delivery process.”13

“The quality of service of international mail is likewise monitored by measuring various stretches of the

postal chain. The UNEX system, managed by IPC, the International Post Corporation, determines D+1

delivery times for inbound cross-border mail (from entrance of the item at the exchange office to delivery

to the addressee) and outbound cross border mail (from deposit at any admission point to the exchange

office in the country of destination).”14.

Developments in QoS performance of Correos

The following is an extract from the 2006 Annual Report of Correos.

Two thirds of capital expenditure went on facilities and infrastructure, 40% more than in the previous

year. The main programmes were aimed at making the universal postal service more accessible by

increasing the number of post offices, removing architectural barriers and updating operational and work

facilities. Close to 13% effective capital expenditure was allocated to introducing leading-edge

technologies to innovate and raise quality and competitiveness. The Company spent 5.3% of capex on

further implementation of automatic processing of postal items. Correos is now close to completing its

automation plan, which seeks to shorten delivery times, reinforce security and improve efficiency.

13 Source – Correos 2006 Annual Report. 14 Source – Correos 2006 Annual Report.


Another 6.6% of capital expenditure went towards updating and enlarging the vehicle fleet, and the

remaining 8.8% was allocated to furniture, security and other items.

Service quality is one of Correos’ strategic goals. Actions for continuous improvement are implemented

in all areas and activities, such as customer service, internal processes and postal distribution. These

measures are specified in the Company’s General Quality Plan, a comprehensive, multi-annual

programme which comprises a delivery quality plan and a postal network accessibility plan.

According to internal audit measurements, the quality achieved in the various letter classes in 2006 was

consistent with the pattern of the previous year. For the rest of products, quality improved, particularly in

the universal postal service. The Paquete Azul parcel service, for instance, was 12.8 points better.

But the internal audit process, despite being firmly established and covering a very large sample size,

does not reflect the entire postal process. Correos therefore commissions an outside study to

complement its internal measurements. The outside study, called SPEX uses external panellists to look

at quality from deposit to actual delivery of an item.

The results give a more realistic picture, because they more closely reflect public perceptions and

encompass the entire delivery process.

The SPEX data for 2006 for ordinary letters showed D+1 quality of 56.1% (7.7 points more than in 2005)

and D+3 quality of 89.9% (a 1.6-point improvement year-on-year). The quality of service of international

mail is likewise monitored, by measuring various stretches of the postal chain. The UNEX system,

managed by IPC, the International Post Corporation, determines D+1 delivery times for inbound cross-

border mail (from entrance of the item at the exchange office to delivery to the addressee) and

outbound cross-border mail (from deposit at any admission point to the exchange office in the country of

destination). According to IPC measurements, in 2006 the quality of next-day delivery for inbound

international mail in Spain held steady, with a slight drop of 0.7 points, while outbound mail saw a 1.4-

point decline in quality of service.

1.4 The mail market

1.4.1 Mail market overall

Figures 1.8 and 1.9 provide data on the mail market, both in volume and in turnover.

Table 0.8 Size of the mail market in turnover (million Euro)

Postal product 2005 2006


B2B non-bulk mail

Individual item mail 1,695 1,750

Cross border mail

Unaddressed mail

Parcel mail 577 569

Express mail 1,553 1,624

Total 3,825 3,943



Table 0.9 Size of the mail market in physical terms (million items)



B2B non-bulk mail

Individual item mail 6,025 6,188

Cross border mail

Unaddressed mail (only Correos) 34 32

Parcel mail 72 70

Express mail 422 481

Total 6,553 6,771


Spain’s GDP is estimated to be circa 850 billion euro, which would make the contribution to GDP of the postal sector as 0.5%. With regard to mail volumes carried by Correos only, the following table was on the Correos website and within the annual report.

Table 0.10 Postal traffic by product line – 2006 information (percentage of the total)

Number %

Basic line 4,157,815,995 76.97

Economic line 1,219,777,756 22.58

Urgent line 24,352,572 0.45

Total sent (including Prisma packages and without

election-related deliveries)

5,401,946,323 100

Source: Correos 2006 Annual Report.

Correos reports “in recent years growth has slowed down. Stagnation is foreseen in the short-term and a slight decline of volumes in the mid-term.”15 It is unclear from the above table if the following is included, but the NPO does report in its 2006 Annual Report that 15 million money orders were processed and that 5.2 million telegraphic products were also delivered.

1.4.2 B vs C

The NRA was not able to provide a breakdown for table 1.11, however, in the ECORYS 2005 report, it was estimated that 28% of mail is posted by SME’s and individuals and 72% by large business, with the greater proportion by financial and institutional sectors. These percentages are by volume and therefore it may be expected that in the region of 70% of mail will be B2C.

15 Source – ECORYS questionnaire to Correos.


Table 0.11 Postal streams in the market for addressed mail in physical terms (million items)

Postal stream 2006

B2B

B2C Ca. 70%

C2B

C2C

Source: Estimate based on ECORYS (2005).

1.4.3 Market opening

According to the NRA, 59.4% of the addressed mail market has been liberalised (in volume). There is no other main competitor other than Unipost (market share 8.2%). Further, there are more than 2,500 operators and their joint market share is approximately 4%. There is no indication of unlicensed or unauthorised competition.

1.4.4 Cross border mail

The NRA did not provide any data on cross-border volumes and no indication was given that problems had been experienced in terms of remuneration issues. Within the UPU Postal Statistics, the following data were provided for the years 2004 through to 2006 for the NPO.16

Table 0.12 Cross-border mail volumes (in million items)

2004 2005 2006

8.3 Number of letter-post

items, international

service – dispatch

222

Excludes advertising

items

142

Including insured letters

135


8.4 Number of letter-post


service – receipt

140 157


133


8.6 Number of registered


service - dispatch

5.5


5.7 4.9

8.7 Number of registered


service - receipt

4.8


3.1 3.3

Source: UPU.

16 Source – UPU Statistics – website.


If the above were indicative of the market then it would appear that cross border volumes are reducing significantly despite the high levels of immigration to Spain.

1.4.5 Impact of innovation

E-substitution

The NPO included the following comment in its 2006 Annual Report:

“The new electronic media pose a tough challenge to Correos’ conventional mail business, but they also

create opportunities for creating higher value added products and open up new channels for marketing

to and communicating with customers.

The Parent Company’s strategy for the online market is to design a specific range of innovative high-

tech services on the one hand, and, on the other, to offer conventional postal products that have been

adapted to the new technological tools.”17

Table 0.13 Impact electronic substitution

Postal product % change in total market volume (avg./year)

Bulk mail and consolidation n.a.

B2B non-bulk mail n.a.

Individual item mail n.a.

Cross border mail n.a.

Unaddressed mail n.a.

Parcel mail n.a.

Express mail n.a.

N.a. is not available.

New services

Correos intends to intensify its investments in 2008 to culminate the innovation and new technology incorporation process in all its processes, products and services. They forecast investing €275.5 million: 11.2% more than in 2007, thus exceeding the one billion euro forecasted in the Investment Plan carried out since 2005. Correos is to continue to diversify its lines of business in 2008. Particularly, it will increase its offer of online services and new products and added value services in response to the new demands of its clients and the specific needs of certain collectives, such as immigrants. In line with this diversification and new offer, Correos forecasts obtaining 23% more turnover from BanCorreos banking services than this year, and earn 8.1% more with the para-postal products (packages, prepaid), PO boxes and non-postal products (certifications, fax, bill payment) and 8.1% more for the giro remittance service.18

17 Source – Correos 2006 Annual Report. 18 Source – ECORYS questionnaire to Correos.


1.5 Market structure and competition

1.5.1 National postal operator/Universal Service Provider

Correos (the NPO) is a corporatised state enterprise, 100% owned by the State.

“The Correos Group comprises Sociedad Estatal Correos y Telégrafos, S.A., Chronoexprés, S.A.,

Correo Híbrido, S.A., and Correos Telecom, S.A. The Group is wholly owned by the Kingdom of Spain.

All four companies operate in the communications market. The core business, however, rests with the

Parent Company, Correos; the other three firms act as complements to Correos’ activities.

The Group caters to individuals and businesses through an offering that is both global in scope and

specialised in its details, ranging from traditional correspondence and hybrid post, telecommunications,

philately, online solutions, courier and parcel services, banking products and convenience products.”19

Postal network

Table 0.14 Postal network of the national postal operator

Correos 2006

Number of post offices 2,113 that provide banking services as well plus 1,148

providing only basic postal services

Total 3,261

Number of postal agencies

Number of street letter boxes 33,609

The NPO was not prepared to disclose what proportion of Post Office Counter costs were related to the provision of mails services. However, the following breakdown of revenues was presented in their 2006 Annual Report: Post-related products 15.4% Non-postal services 31.4% Philately products 20.4% Banking services 62.7% Western Union transactions 25.5% There are no agency post offices i.e. all are directly controlled by Correos.

19 Source – Correos 2006 Annual Report.


Revenues

Table 0.15 Division of turnover of the national postal operator per market segment

Postal product 2006

(in million Euro)

%

Bulk mail and consolidation (hybrid

mail up to posting)

Telecom

Philatelic

7.8

1.6

0.3

0.4%

0.1%

B2B non-bulk mail

Individual item mail plus

Counter Services

1,606.7

416.3

74.0% (estimate)

19.1% (estimate)

Cross border mail

Unaddressed mail

Parcel mail

Express mail 138.5 6.4%

2,171.2 100%

Source: Correos 2006 Annual Report with ECORYS estimates.

Profits

For the Group as a whole the company reported profits in its 2006 Annual Report of 160 million euro. Given the funding provided by the state, it must be assumed that the NPO reports the USO as loss making. Sister companies in the Correos Group

20

Chronoexprés is the Correos Group’s specialist operator in the domestic and international express parcel industry, the firm offers a portfolio of guaranteed deadline delivery services, including Chrono 10, Chrono 14 and Chrono 24; express transport services with additional features for special requirements, such as Multichrono; solutions specific to given industries, like retail opticians or mailbag deliveries; and cross-border services, like Internacional Exprés and Internacional Estándar. The subsidiary employed in 2006 1,331 people and operates a structure of 63 logistics centres, over 100,000 square metres of warehouse facilities, 2,085 vehicles and 2,166 distribution routes. After extraordinary items and provisions, the subsidiary’s results, before tax was, -9.1 million euro, a substantially smaller loss than in 2005 and bringing the firm closer to breakeven. This performance was the outcome of an increase of over 8% in revenue and 1% cost savings. Correo Híbrido is the Groups firm specialising in integrated management of companies’ mass communications – billing, bank statements, letters, advertising, and others.

20 The following is based on Correos 2006 Annual Report.


Correo Híbrido’s services include secure electronic transactions, document consultancy and design, enveloping and sorting of postal items up to posting at the facilities of Correos. In addition, Correo Híbrido offers document image digitisation, storage and custody, postal item tracking and reverse hybrid mail solutions. The company employs 158 people across three sites, equipped with the latest technologies in the industry. The firm handles 9.5 million envelopes and 17 million pages a month. Profit before tax grew 46.6% from 208,753 euro in 2005 to 306,112 euro in 2006. Correos Telecom’s role is to manage Correos’ own telecommunications network. It provides telecom services to the Parent Company as its key client, promotes and sells surplus capacity and works on new online projects relating to the postal industry. Alliances and partnerships

According to Correos, in 2006, bilateral agreements were signed with other national postal operators, such as the Austrian Österreichische Post and Swiss Post, and similar strategic alliances were made. Chronoexprés caters to its clients’ international requirements by making available the best worldwide distribution networks under its agreements with the US-based FedEx and the Europe-wide company GLS. According to Correos, the firmly established alliances and improved systems for integration with its partners enable Chronoexprés to provide an international express service to high standards of quality. In 2006, Correos joined the Kahala Postal Group, composed by USA, China, Japan, Australia, Hong Kong, Korea, UK and in 2007, France. The objective was to face the increasing pressure from international integrators and to offer express parcel services of high quality.21

Table 0.16 Overview alliances and partnerships of the national postal operator (2007)

Country Mail Express Logistics

Austria Austrian Österreichische

Post

Switzerland Swiss Post

World FedEx

Europe GLS

USA, China, Japan,

Australia, Hong Kong,

Korea, UK and France

Kahala Postal Group Kahala Postal Group

Source: ECORYS questionnaire to Correos.



1.5.2 Competitor postal operators

The authorised operators are mainly active in parcels, logistics and express, a couple of hundred specific authorised operators are (also) active in universal postal services. Unipost is the only serious competitor of Correos in the addressed mail market. Other specific authorised postal operators are very small and are only active in local mail delivery. According to Asempre, the ‘Asociación Profesional de Reparto y Manipulado de Correspondencia’, the number of active competitors has decreased from around 350 operators in 1999 to around 200 in 2004. Most of the largest active postal operators have been integrated in the Unipost network or have exited the market. Competitors are especially active in urban regions and focus on local mail. Some operators also provide a regional or sometimes national service by collaborating with other postal operators, of which Unipost is the main example, or by handing over the mail to Correos y Telégrafos for further delivery nationwide. Unipost

22

Unipost is based in Barcelona and comprises of a network of the 19 main private postal operators in Spain. The shareholders are the Raventós family (55%), Deutsche Post (38%) and other minority shareholders. In 2001 Unipost was formed and its owners, consisting – at that time - of the above mentioned private postal operators, started to integrate and consolidate local and regional postal operators into one national network. Some postal operators have merged into Unipost, other operators work under their own name but are part of the Unipost network and others (around 170 operators) act as a franchise. Unipost provides the following postal services:23 • Collection, sorting, transport and delivery of addressed inter-city mail > 50 grams and

direct mail; • Collection, sorting, transport and delivery of addressed intra-city mail, partly done by

the franchised operators; • Delivery of inbound international mail above 50 grams received from Deutsche Post

World Net, other PPO’s and Direct Entry customers; and • Collection of outbound international mail above 50 grams further processed via DHL

Global Mail. In addition, Unipost provides the service of planning and implementation of direct marketing campaigns for their main clients. These include: • Planning and management of direct marketing campaigns; • Undertaking research studies on consumer patterns and trends; • IT applications to facilitate and manage consignments; • Printing and manipulation of everytning involved in bulk mailings.

22 The information in this section is taken from ‘Prospects for competition in the Uk postal markt,’ unpublished study for

Postcomm, ECORYS 2007, Annex 4. 23 www.unipost.es.


Unipost operates three logistic platforms, 51 own production sites and 185 service outlets across Spain. Franchisers of Unipost have 134 centres, according to Deloitte (2006). Unipost has around 4,500 employees with 2,500 own staff and another 2,000 employees of independent partner companies. Unipost owns 137 trucks and vans, and 220 small two-wheel vehicles. Unipost covers about 70% of the Spanish population and 90% of the items delivered.

Unipost processed more than three million consignments a day in 2007. Most, which were delivered to more than 1,300 municipalities and/or business areas within cities. In 2005 460 million items were handled. In 2006 the annual volume handled was 513 million items, and 582 million items in 2007 (around 90% of these items is addressed mail). Unipost served roughly 15,000 business clients in 2007. Most. Unipost’s clients consist of financial institutions, retailers, utilities, publishers, direct marketers and local governments. 75% of the clients are large companies and 20% medium-sized and small companies. The quality of service offered is indicated in Table 1.17. According to Unipost the regularity of the postal service is much more important than the transit times: large mailers want the postal operator to deliver mail that can be planned at a certain date. A postal operator needs to perform a regular service to guarantee this.

Table 0.17 Quality of service objectives by Unipost

24 hours 48 hours 72 hours 96 hours

Intra-city 90% 100% 100% 100%

Inter-city 70% 90% 97% 100%

Note: The quality of service objective of Unipost is to deliver 70% of inter-city mail within 24 hours after

collection, 90% within 48 hours of collection, etc.

Source: Unipost.

The turnover of Unipost in postal services has developed positively in the last few years: € 78.6 million in 2007, as opposed to € 89.1 million in 2006 and € 78.2 in 2005. In 2008, Unipost expects to realise a turnover of around 108 million euro.

Table 0.18 Development in turnover of Unipost

Year Turnover (million €) Annual Growth

2003 63.7

2004 67.1 5.3%

2005 78.2 17.1%

2006 89.1 13.9%

2007 102.7 15.3%

2008 (expected) 108.4 5.5%

Source: Unipost.


In October 2004, DPWN has expanded in the Spanish postal market through the acquisition of a 38% stake in Unipost. This enables Unipost to handle international mail and to consolidate parcels. Cartes Lleida

Cartes Lleida is a private company, which has its main office in Lleida. It provides the following services. Basic Services: • Distribution of letters in urban areas; • Delivery and stamping of letters up to 100 grams within urban areas; • Distribution of letters of more than 100 grams within urban areas; • Certified mail; • Distribution of direct advertisement: printouts, periodicals, catalogues, publications; • Distribution of direct advertisement samples. Complementary Services: • Collections to places of residence; • Planning and direct marketing campaigns; • Administrative issues.

1.5.3 Competition

Accurate estimates of the joint market share of competitors in the addressed mail market are difficult to make. Or, as Correos reported to ECORYS:

“The Spanish postal market has had competition since 110 years. Its unique characteristic of a

liberalised local letter-post market made it easy for many postal services providers to develop

companies that have a non-negligible share in it. Since Correos is only one of the companies providing

postal services, and the information of neither volumes nor revenues from other postal operators is

available, we therefore cannot provide any such (market share) analysis.”24

Available data point at the following. According to the NRA, the market share of Correos was 94.1% in addressed mail delivery in 2005 and 93.7% in 2006. According to Deloitte (2006) the actual market share of competitors in 2005 was 7-8%.25 For 2007, the NRA reported that Unipost has a market share of 8.2% in volume and 4.9% in turnover (see Table 1.20). The main reason behind these differences in reported market shares is the uncertainty about the scope of activities of the small private postal operators. ECORYS estimates that the joint market share of these CPOs is in the range of 10-14%.

24 Source – ECORYS questionnaire to Correos. 25 According to figures of Deloitte, competitors reached a total turnover of 106 million euro in 2004, less than the 157 million

euro turnover reached in 1999 and 135 million euro in 2003.


1.5.4 Competition issues

Within the ECORYS 2005 report on Spain, two areas of conflict were identified: 1. The restrictions on the franking fees provided to private providers; 2. Abuse of dominant position by Correos.

The former has been resolved through the Real Decree 1298/2006, of 10 November 2006 and the Resolution of the Undersecretary's office of 23 April 2007. In terms of the latter, this was resolved by the Court of Defence of the Competition of Spain in its resolution of 16 June 2005. Correos was fined 900,000 Euros and instructed to abstain from prohibited practices. VAT

As of 1 January 2006, non-reserved postal services from the NPO became subject to 16% VAT. The new law changes the tax treatment of postal services. From that date, VAT exemption only extends to reserved services (money orders, inter-urban and international mail under 50g, and postal communications between individuals and Government). There is now a tax difference between local items (non-reserved, and hence subject to VAT) and non-local items (reserved up to 50 g, exempt from VAT). Therefore, to keep to a single rate for all domestic mail regardless of destination, the Parent Company decreased the price of urban items up to 50g, such as to maintain a single price even after application of VAT. Although this would indicate some levelling of the market conditions, it does appear to give the NPO a complicated VAT situation in that those services it provides that span the 50g weight step will have two VAT levels.

1.5.5 Results of competition

As the Spanish market has been substantially open to competition for many years, the lowering of the reserved area has only had minimal impact. According to ECORYS, competition has been an incentive to Correos for corporate restructuring aimed at improved QoS performance. The major development appears to be the aforementioned opening up of the incumbent’s postal facilities to other operators.

1.6 Customer needs

Correos uses a customer satisfaction index regularly to gauge users’ perception of the standards of service performance. 26 In 2006, small and medium enterprises and private

26 Source – Correos 2006 Annual Report.


individuals gave the Company a score of 7.03, while large customers rated at 7.21 (out of 10). Correos operates several different customer service channels. The main channel is the telephone help-line, which in 2006 handled 1.9 million calls, 11.2% more than in 2005. Correos handled 32.6 complaints and claims for every million delivered postal items, which was 10.8% fewer than in 2005. Acoording to the Annual report 2006, domestic claims (on goods and services subject to compensation for damages) declined 14.8% year-on-year, partly reflecting advances in item trace-ability.

1.7 Price performance

1.7.1 Tariffs

With effect from 1 February 2006, Correos revised its postal service rates; basic items up to 20g were priced at 0.29 euro. This was further increased to 0.30 euro in 2007.

Table 0.19 Public tariffs (in Euro)

Postal product 2005 2006 2007

Letter post 1st class

Letter post 2nd class 0.28 0.29 0.30

Letter post cross-border 0.53 0.57 0.58

Parcels

Parcels cross border

Registered item

Insured item

Bulk mail, 20g

Bulk mail, 100g

Bulk mail, 300g

Total

Source: Official Bulletins provided by Correos.

Note: Prices on the Correos website as of March 2008 are as follows (note that these new prices are either

including or excluding VAT depending on service – see previous section)

- Letter Post 2nd Class 20g: 0.31 euro;

- Letter Post 2nd Class 100g: 0.73 euro;

- Registered 20g: 2.44 euro;

- Cross border 20g: 0.60 euro;

- Parcel 5kg: 7.05 euro;

- Cross-border parcel 5kg: 25.23 euro.


Table 0.20 Public tariffs (in PPP)

Postal product 2005 2006 2007

Letter post 1st class

Letter post 2nd class 0.31 0.32 0.32

Letter post cross-border 0.58 0.63 0.62

Parcels

Parcels cross border

Registered item

Insured item

Bulk mail, 20g

Bulk mail, 100g

Bulk mail, 300g

Total

Source: conversion rate based on Eurostat data.

1.8 Employment aspects

1.8.1 Employment

According to national statistics, the postal sector employed 249,468 workers in 2004 (NACE 64). There are 5,499 companies in the National Company Register. Most of them have either no employees or very few employees. Only 15 enterprises have more than 15 employees.27 The NPO has reported an increase in total employees of over 3,900 in its 2006 Annual Report, although this number is difficult to balance with year on year movements reported in its 2006 Annual Report.

Table 0.21 Employment in the sector, in employees and [FTE]

Operator 2006 FTE 2006 Staff

Correos total

Of which civil servant

Of which flexible

67,089

34,067

63

Unipost 2,137 4,200

Total 249,468 (2004)

Source: Ministerio de Fomento & Correos 2006 Annual Report.

In terms of the NPO, and its parent company Correos Group the analysis of employment type, civil servants accounted for 52% of total staff, while employees under ordinary contracts represented 48%, which percentage is set to rise, given that all new recruits join the Company under ordinary employment contracts.

27 Source: European Foundation for the Improvement of Living and Working Conditions 2007.


With regard to employment, Correos has developed a dual strategy. On the one hand, there are a large number of workers with stable contracts. On the other hand, at certain periods of the year, such as Christmas or election time, temporary workers are contracted for a fixed term. The trade unions consider that the liberalisation process is affecting the sector negatively, reducing the number and quality of the jobs.28

Table 0.22 Employment by universal service provider per segment, total and [% flexible]


Mail and Group 64,909 65,515

Express 1,331 estimate 1,331

Hybrid mail 141 158

Telecoms 22 estimate 22

Not accounted for 783 783

Total 67,186 67,809

Source: ECORYS questionnaire to Correos plus 2006 Annual Report.

For 2006, the following more detailed breakdown is provided in the Annual Report: Mail Division 51,731 Post Office Division 12,229 International Unit 643 Philately Unit 86 Company-wide departments and support units 826

1.8.2 Employment conditions

Table 0.23 Wages as proportion of total costs (in %) operating expenses

Operator 2005 2006

Correos 69.7% 70.6%

Source: Correos 2006 Annual Report.

On 19 June 2006, Correos and the unions CCOO and CSI-CSIF signed the Parent Company’s Second Collective Bargaining Agreement, valid to end 2008, which covers staff under ordinary employment contracts, and the General Agreement for Quality, Employer Excellence and Human Resources Regulation.29

The European Foundation for the Improvement of Living and Working Conditions 2007 contains the following on the collective labour agreement.

There have been two collective agreements in the state company Correos y Telégrafos, in 2002 and

2006. The second will continue to regulate pay in this company until 2008. According to the workers’

28 Source: European Foundation for the Improvement of Living and Working Conditions 2007. 29 ECORYS questionnaire to Correos.


representatives, the two collective agreements have helped to regulate a sector that was formerly

lacking in regulation, and there is some hope that they will affect other companies of the sector.

Correos was formerly part of the organic structure of a Ministry. The penetration of trade unions and the

regulation of working conditions is therefore similar to that of agreements achieved in the public sector,

even though it is now a state limited company.

The first trade union elections took place in Correos y Telégrafos in 1978, even before the regulation of

the civil service elections. At that time, UGT obtained the greatest support. Other trade unions that

obtained support were CSUT, CCOO, Asociaciones Profesionales Independientes, Sindicato Libre y

Unión Sindical Obrera (USO).

Since then, UGT and CCOO have been the unions with the greatest support in Correos. Other minor

unions have always been present, although they have varied over time. According to the unions, the last

twenty years have been a period of industrial peace, with few mobilisations. The reason for the

mobilisations in 1984, 1998 and 1999 was the liberalisation regulated by Law 24/1998 (Aguilar Pérez,

2002).

The new law passed in 2006 is now being challenged by unions, which have called new mobilizations

for early 2007.

The information available to ECORYS regards Correos is that CCOO is the strongest trade union. The sector has yet to develop a system of collective representation in most competitor postal operators, as they are small. With regards to the changes to the USO requirement with regard to door-to-door delivery referenced previously the following extract is from an article by the publication “Typically Spanish” on 23 January 23 2008:

“Postal union CIG is not happy. They say that in Galicia alone it means that 400 of the 1,200 postmen

and women in the region are likely to lose their jobs, while the company insists that no jobs are to be

cut. One postman from Lalín in Pontevedra, Rafael Iglesias, told El País that the only door-to-door state

service was the post. ‘Not even the Guardia Civil cover the country as we do’, he said. Workers protests

are now being organised.”

1.8.3 Productivity

Table 0.24 Productivity (in items/FTE) SIP

Operator 2005 2006

Correos (Based on total Correos

staff)

82.7k per staff in post (sip) per

annum

82.5k per sip per annum

Unipost 122.1k per sip per annum

Sector average

Source – Correos 2006 Annual Report and Ministerio de Fomento.


1.9 Technological developments and environment

1.9.1 External

Table 0.25 Percentage of letter mail in the communications’ market (turnover)

2005 2006

Market share letter mail 22%


1.9.2 Internal

Table 0.26 Percentage of letter mail automatically processed

2005 2006

Percentage 77% of basic line items 81% of basic line items

Source: ECORYS questionnaire to Correos.

In 2007 there has been a further implementation of the automation plan, with the opening of a new automated processing centre in Las Palmas in February; the acquisition of six new automatic sorting lines in April; and the equipment of Barajas postal centre with an automatic parcel sorting system in August.30 According to the Annual Report 2006 of Correos, there were three especially significant projects for Correos in 2006:

1. Implementation across the Company of RFID technology: the Q-RFID Programme applies the latest radio frequency tracking technologies. RFID enables the Company to track mail end-to-end throughout the postal process, which means logistics can be optimised and any detected problems can be corrected;

2. Provision of PDAs (personal digital assistants) to all urgent delivery staff: in 2006 the Parent Company launched another major innovation programme aimed at bolstering its distribution capability in the framework of its Delivery Quality Improvement Plan, the goals of which include updating and computerising Correos’ 1,730 delivery units. Under this initiative, the company’s 100 special services units, which employ over 1,600 urgent delivery staff, were equipped with PDAs. The PDAs provide WiFi connectivity and image digitisation and let users record, track and report information on deliveries. This means customers can track the delivery status and terms of their postal items using the Parent Company’s website;

3. A set of initiatives under the INTEGRA project for corporate modernisation.



1.9.3 Environment

With regard to environmental policy, Correos had the following comments on its website:

“As part of the Social Responsibility Plan that we introduced in 1999, in 2000 we decided a continuous

focus for the future should be an environmental protection programme for the reforestation of Spanish

territory as, due to the nature of our work, we find ourselves immersed in the controversy generated by

the consumption of paper derived from tree felling.”31

The following additional information was provided to ECORYS:

“Correos’ operations are invested with a social and ethical commitment embodied in its Code of

Conduct, which sets out the Company’s values, whereby employees and executives strictly undertake

to abide by ethical standards, business integrity and current laws and regulations.

Correos is a member of the Fundación empresa y sociedad (Business and society trust), which

encourages, assists and coordinates businesses to align their social actions and form networks to help

the underprivileged face their specific challenges.

The Company has adhered to the United Nations Global Compact, an ethical initiative by which

companies across the world embed within their strategy and operations ten principles of conduct and

action regarding human rights, labour, the environment and the fight against corruption.

Besides, Correos complied with the European Union anti-pollution laws. In terms of renovation of its

vehicle fleet, in 2006 Correos bought 28 Euro-4 type lorries, thus moving ahead of the EU legal

requirements which came into force on 1 October 2006.”32

1.10 Sources

• UPU 2006 Statistics www.upu.int. • Correos web site www.correos.es. • ECORYS questionnaire to the Ministerio de Fomento 13th March 2008. • Publication – Typically Spanish

www.typicallyspanish.com/news/publish/index.shtml. • http://www.boe.es/boe/dias/2007/05/09/pdfs/A19902-19905.pdf. • CONSOLIDATED ANNUAL FINANCIAL STATEMENTSOF THE CORREOS

GROUP. • Ministerio de Fomento website www.fomento.es. • European Foundation for the Improvement of Living and Working Conditions 2007. • RD 503_2007 Reglamento Postal mod A19902-19905. • Correos 2006 Annual Report. • ECORYS questionnaire to Correos 19th January 2008. • ECORYS estimates. • ECORYS 2005 Report.

31 Source – Correos website. 32 Source: ECORYS questionnaire to Correos.


• Official Bulletins provided by Correos www.correos.es. • Memoria del sectorpostal español 2005 (Deloitte).


1.11 Appendix

Real Decreto 1289/200633

Chapter I - General dispositions

Article 1: Objective

The Royal Decree has the objective to regulate the access of the postal operators that provide services,

which belong to the area of the universal postal service, to the public postal network. It also establishes

the procedure to dissolve the controversies that arise between the above-mentioned operators and the

provider of the postal universal service with regard to the existence of exclusive rights, the sufficiency of

the guarantees offered to the users and, with respect to other questions in relation to the access of the

postal public network.

Chapter II - The access to the public postal network

Article 3 Agreements on the access to the public postal network

1. The operator responsible for the performance of the universal postal service is obliged to

facilitate the access to the postal public network to all the postal operators that hold a singular

authorization, if they request it;

2. The conditions of access to the postal public network respect the principles of transparency,

non-discrimination and objectivity and other rules foreseen in article 48.2 of the Regulation,

which is dedicated to the regulation of postal services.

Article 4 Reference conditions for the access to the public postal network

(2) The conditions of reference for access need the following elements:

• Centres of admission and schedules of the deposits, with which will have to be communicated

in advance;

• Minimum volume of dispatches;

• Notes of delivery to facilitate the control of the deposits and necessary indications for the

separation of accounts, as minimum, for each reserved service and the non-reserved

services, included in the universal postal service;

• Special conditions for addresses, adjustment of addresses to the standardized structure and

the return of mail, as well as the identification of the authorized operator;

• Level of classification of the dispatches and conditions of preparation, contention and

presentation of the dispatches;

• The price of the service that will be calculated based on the volume of the dispatches and the

costs avoided by the operator, who asks for access to the public postal system. These

avoided costs can be related to the regulation of the deposits, the composition of the

destinations of the deliveries, the nature of the deliveries, their weight and dimensions, and to

the delivery schedule agreed regarding the Quality of Service;

• Conditions of invoicing, systems of stamping and the payment of the service, prepayment or

any other system admitted by law.

33 Source: translated from http://www.boe.es/boe/dias/2006/11/23/pdfs/A40999-41001.pdf.


The technical, operative or commercial criteria that must prevail for the concession and revocation of

the authorizations of the use of machines to which the universal postal service has been entrusted, will

have to be specifically included in the conditions of reference.

Correos published the following press notice about Royal Decree 1298/2006:34

On 10 November 2006, at the suggestion of the Ministry of Public Works, the Government approved

Royal Decree 1298/2006, which regulates access to the public postal system by postal operators. This

Royal Decree establishes that:

• Only those postal operators with sole administrative authorization to provide postal services

included within the scope of the Universal Postal Service may access the public postal

system managed by Correos.

The Public Operator, by Law, continues to provide postal services, amongst others, for interurban

deliveries of less than 50g, which it must still carry out until the postal services are fully deregulated in

Europe.

Access to the System shall be definitive, until the postal deliveries have been completed. Therefore,

once access has been granted to the public system, Correos and its workers shall be responsible for

the different tasks (classification, as appropriate, transport, delivery…) through final delivery to the

recipient.

34 Source:

http://www.correos.es/comun/informacionCorporativa/desarrolloNoticias.asp?id=450&idNodo=desarrolloNoticias&idmRSS=

ENG (news).

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