NZ Post squeeze reckless: Freightways

Dean Bracewell says the barriers to setting up a national mail distribution network to compete with NZ Post are very high. Photo / Martin Sykes

The boss of listed courier company Freightways has hit out at New Zealand Post, accusing it of being "reckless" in its bid to alter Freightways' terms of access to the state-owned postal company's delivery network.

Speaking at the company's half-year result briefing yesterday, Freightways managing director Dean Bracewell said that when the postal industry was deregulated in 1998 a "deed of understanding" was established to ensure independent postal operators access to NZ Post's network.

He said Freightways had had an "understanding" with the SOE since 1998 about the terms of access to its delivery network.

Under the terms, Freightways would access NZ Post's network at a discounted rate. He said NZ Post increased the discount from 10 to 16 per cent 12 months ago.

But Freightways got a proposal last October saying the discount would be dropped to just 8 per cent, and a "commercial arrangement" established in some areas, where no discount would apply.

"We believe it's only an attempt to thwart competition," he said.

Bracewell said the barriers to setting up a national mail distribution network that could compete with NZ Post were very high, and Freightways held only 3 per cent market share in mail delivery.

"You're harking back to the monopoly days," he said. "When [NZ Post] are a monopoly they've got all this legacy volume, which we can't reasonably be expected to compete for at this development stage of our business."

He said the Commerce Commission was reviewing Freightways' complaint.

NZ Post group manager Stephen Henry said the SOE had briefed the Commerce Commission, and was aware of the approach to the commission by "access customers".

"We continue to co-operate with the commission on this matter," he said.

Freightways had also asked the Government to step in and "bring some independence" to the postal industry, Bracewell said.

The Ministry of Economic Development had been involved, and the department was thinking of reviewing postal industry policy.

Freightways' half-year report showed the company was still to recover from the impact of the global downturn.

Net profit for the six months ending December 31 was $14.5 million, 8 per cent lower than in the previous corresponding period.

Bracewell said it was a satisfactory result given the tough economic conditions the company had been forced to work through.

Consolidated operating revenue for the half-year was $165 million - down 4 per cent on the previous year.

Bracewell said the company had seen a long history of revenue growth, and it was the first time revenue had dipped below a previous year.

"The business had held up relatively well to 2009 ... but the effect of the economy has certainly shown itself in these numbers."

He said volume from existing customers had fallen 5 per cent.

Goldman Sachs JBWere analyst Marcus Curley said the Freightways result was "below expectations" and reflected a gradual recovery in the economy. "It reflects the fact we have not seen a New Zealand economic recovery which has played out the way we expected it to."

Bracewell said there were some positive signs emerging in the company's outlook.

"Albeit, we have not seen a sustained, across-the-board, improvement, which indicates to us continuing market volatility." Freightways shares closed down 15c at $3.06 yesterday.