TNT chief says split-up call ‘disruptive’

Like all incumbent postal operators, TNT was already suffering from declining mail volumes due to the rise of digital communications.

But this year the Dutch group had to struggle with what it called “the perfect storm” of full competition in its home market and an ongoing collapse in volumes for express services due to the global financial crisis.

A perennial subject for takeover speculation – most recently in July 2008 when its bigger US rival FedEx held preliminary takeover talks – the group must now face the further challenge of activist shareholders who favour splitting the mail business from the express operations.

Peter Bakker, the group’s chief executive, told analysts last Friday that a break-up would not unlock any value, suggesting that potential bidders for parts of the company should instead just call him.

“Splitting the group in our minds does not help address the challenges or get to the opportunities that we have identified for this group,” he said. “It will be a highly disruptive decision to consider that.”

Instead, unveiling a new “Vision 2015” six-year plan, he said TNT had decided to drop plans to become a European leader in mail delivery because the liberalisation of EU postal markets had been “distorted”.

TNT will now consider “partnerships and sales” for its European Mail Network that operates in seven countries, including Italy, the UK and Germany. The group also hinted for the first time that even its core Dutch mail business might “over time” participate in “possible future European Mail incumbent consolidation”.

TNT says it needs to cut labour costs because its new competitors pay €8 ($11.80) an hour while it is saddled with costs of up to €23 per hour. The unions accept job losses are unavoidable but are pushing for a 1.5 per cent pay rise.

Meanwhile, TNT’s global express delivery network, which grew out of the Australian group that merged with the Dutch post office in 1996, has seen international volumes fall to 2006 levels and European air volumes drop to 2002 levels.

But the business, which accounted for €1.5bn of TNT’s €2.5bn revenues in the third quarter, is seen as attractive, particularly for its Asian operations and a strong European road network.