2 - The first genuine contractual plan between the Government and La Poste: a stable but dynamic framework for management

The attempt to set up the first contractual plan during the period 1991-1994 ran up against technical difficulties (absence of a balance sheet, accounting in the process of being reformed, analysis of financial relations between La Poste and the Government, etc.).

The drawing up of the second contractual plan covering the period 1995-1997 (Note: the contractual plan is reproduced in the appendices) gave rise to a high quality technical dialogue between La Poste and the different Government administrations involved, as well as to broad cooperation not only within La Poste, particularly with the work force representatives, but also with different players in the sector. One high point of this was the opinion of the High Commission on P&T Public Service (Commission supérieure du service public des PTT) on the proposal, which was favourably received by the public, with a few reservations.

The contract was examined by the Management Board of La Poste on 13 October 1994 and then signed on 14 October by the Ministers in charge of postal services, the budget, and the economy, as well as by the chairman of La Poste.

This contract sets the guidelines and the management framework for the activity of La Poste for the next three years and will enable it to continue to grow on increasingly competitive markets, by ensuring the conditions for long-lasting financial stability.

It also defines what role La Poste will play in policies set by the Government, particularly in the area of regional development and aid to the press.

2.1. Mail: an aggressive commercial policy, keeping tariffs reasonable

In the area of mail, La Poste expects sustained growth which will, however, be affected by an increase in alternate forms of correspondence (fax, EDI, etc.).

The postal business is undergoing change

According to a study the DGPT assigned to the Tenor Conseil consulting firm, by the year 2000 growth in EDI will bring about a potential loss in postal traffic for La Poste estimated at approximately 10% of the current volume of business of the public postal operator.

Assuming a structure of operations similar to now, the mail business of La Poste in the year 2000 should amount to between 18 and 20 billion items (compared with 12 billion today), and the business likely to be replaced by EDI solutions should amount to about 1.5 billion items. This proportion could grow in the following decade due to changes in flows in the social services/health care sector.

This trend could, however, be counter-balanced by other effects: productivity gains by companies using EDI could, for example, be used for commercial purposes and thus could encourage the growth of direct marketing. Forecast for changes in the turnover of La Poste's mail business should therefore take into account all of these trends.

In response to these new modes of communication, La Poste is strengthening its growth efforts through improving its services, particularly for business. These efforts should make it possible to maintain growth in the volume of mail for the period covered by the contractual plan about equal to that of GDP (GDP -0.5%).

As for tariffs for services that are under monopoly control, particularly letters, overall rises from 1995 for this same period will be limited to an average rate equal to the consumer price index.

The aim of this tariff policy is to stop considering letter tariffs as a simple readjustment variable. Tariffs are related to developments in demand and are a key factor for growth. Even though today less than 20% of turnover from mail is generated by services facing competition (parcel delivery, value-added services, and "postcontact" or non-addressed direct mail), monopoly services are facing indirect competition from new modes of communication.

In order to meet this direct and indirect competition and to prepare for the gradual controlled opening of the postal sector to competition, La Poste also needs to develop its tariff policy to better adapt the tariff structure of its services so as to limit, within the constraints of the geographic alignment of the base tariff for its reserved services, any risks of cream-skimming which could endanger the viability of the public service.

Ambitious quality of service objectives for mail

objective to reach 1994

in 1997 results

letters delivered to households on Day+1: 80% 76.8%

letters distributed to households on Day+2: 96% 93.5%

business mail on Day+l: 83% 75.9%

inter-city mail on Day+1: 90% 84.7%

In 1994, as La Poste had promised, rates for letters and "ecopli" (economy mail) were not increased. Given the significant tariff hikes in the preceding years, the increase in special tariff services, which are heavily exposed to competition, was able to be kept within acceptable limits (an average of 5% on premium services such as "postimpact" addressed direct mail, "Colieco TS" parcel service and catalogues). These prices are part of a catch-up plan aimed at making these structurally costly products profitable.

La Poste continued to develop its range of pre-stamped products aimed at consumers and small and medium-sized enterprises (the marketing of "Diligo", an experiment in pre-stamped envelopes started in the beginning of 1995) and, for businesses, it has set up the "Colissimo entreprises" service, which confers important reductions on high quantity shipments (consignor contracts).

Finally, in a postal environment marked by the growth in competition and by significant institutional and regulatory changes at the European level, the Government and La Poste are reaffirming their intention to guarantee a public service that is accessible to everyone at the best prices, under conditions ensuring the economic viability of the public operator.

2.2. Financial services: stabilising the management structure

La Poste's financial services, which have an overall market share of about 10%, play a crucial and unique role in the French financial system. While maintaining their specific features, the contractual plan tends to link their payment system to changes on the financial markets, by tying payments on post office accounts to market rates. In fact, deposits in post office accounts with the Treasury will henceforth be paid at a rate referenced to thirteen week fixed rate bonds. Nonetheless, in order to take into account La Poste's collection costs, the applicable rate will not fall below 4.75% nor rise above 6.50%.

As for Passbooks A and B, La Poste's role in the collection of these funds, which are managed by the Caisse des Dépôts savings bank as part of social policy on house financing, will be reimbursed at the level of 1.5% of outstanding credits for the three years of the contractual plan.

This system of payments will provide the enterprise with the stability and visibility needed for a management system that is dynamic and attractive, so as to enable La Poste to maintain its overall market share and consolidate the financial stability of the business.

A new payment system for the outstanding credits of La Poste

The signing of the contractual plan between the Government and La Poste will make it possible to open negotiations on a new basis for La Poste's financial services, putting an end to the strictly administrative logic that has prevailed.

With more than FF 800 billion in outstanding credits at the end of 1994, including some FF 150 billion in post office account funds centralized in the Treasury and FF 350 billion in savings (including Passbook A) maintained at the Caisse des Dépôts savings bank, La Poste plays a significant role in France's financial sector.

The DGPT is attentively following the development of La Poste's UCITS products. But of course it is in relation to its centralized services that the DGPT plays the role of negotiator between the public operator and the Ministry of the Economy.

In this regard, the work on the contractual plan has made it possible to significantly change the nature of the negotiations between La Poste and its financial supervisors, in particular by beginning to switch over from the administrative system of payments on post office accounts (payment rates fixed by decree) towards a system based on the market and collection costs.

In addition, La Poste's commitment to develop an effective accounting system that makes it possible to provide a fine-tuned customization of accounts according to occupation will also make it possible to improve controls on management of the financial services.

While, due to basically economic reasons, the underlying question - whether or not to centralize these funds - was excluded from these negotiations on the contractual plan, the relationship between the Government and La Poste is definitely on the path towards change.

The period of the 1995-1997 contractual plan will thus be favourable for setting up a process of reflection and analysis on the development of La Poste's financial services. This process should make it possible to equip the operator with tools to develop its financial business in a way that is acceptable for all the players in this sector.

2.3. Regional development: developing partnerships and local coordination

The contractual plan reaffirms the role of La Poste in regional development, particularly in the rural areas. Adapting these postal services will be handled through closer negotiations with local elected officials, under the supervision of the Departmental (regional) Prefect.

Postal services in rural areas will be revitalised by developing partnerships with local business.

Hence, in rural areas a renewed form of partnership with the local authorities for managing post offices is once again being developed; similarly, La Poste is taking part in the Ò1,000 villages" operation, as well as in the policy of creating "Public Points".

Thus, various kinds of partnership have been set up today or are in the process of being negotiated: an agreement has been signed with the national association of tobacco dealers (Confederation national des debitants de tabac) in order to distribute part of the range of postal products (the "ready to mail" range); discussions are ongoing with "Relais H"; and "Postal Points" are being set up in service stations and large stores.

Finally, La Poste plays a role in regional development by providing diversified services to those living in the most isolated areas, for example, by offering many services for the Government (motor tax discs, tax stamps) and on behalf of companies or public institutions (telephone directories, SNCF train tickets, ANPE State Employment Agency job offers, library services, etc.).

In poor suburban areas and disadvantaged neighbourhoods, La Poste is playing a part in the Government's urban policy, in particular, through the signing of an agreement aimed at the co-financing with the Government of an important investment programme for rehabilitation and the creation of offices.

The law of 4 February 1995 setting out guidelines for regional development reaffirms the role of the Government and of contractual plans in determining objectives for state-owned corporations and public institutions in the area of regional development.

Any decision to reorganise or eliminate services for users that is not part of the objectives fixed in the contractual plan must be the subject of an impact study that is submitted to the relevant local officials as well as to the Prefect.

Local coordination concerning La Poste

La Poste's responsibility for regional development requires close cooperation with local Government, consumers and local business.

The principle of coordination was set out by the law of 2 July 1990 (Article 38) and by the schedule of terms and conditions (Article 25).

It is based on the existence of two sets of Government bodies: Departmental coordination commissions and the local postal boards at the sub-Departmental level.

The Departmental body must meet at least once every year. The minutes of each meeting are sent to the Prefect who passes them on to the Directorate General of Posts and Telecommunications (DGPT).

The assessment made in 1994 covering 1993 reveals that the level of coordination varies greatly between regions.

Meetings are being held less frequently, and it seems that in 1993 the Departmental body did not meet in 35% of the departments, as compared with 12% in 1992.

In addition, imbalances in the composition of the bodies are becoming apparent.

The level of absenteeism for elected officials, business representatives and consumer representatives was about 30%. In virtually all cases, consumers are represented by at least one member of a local consumer group.

The main subject of discussion is still the postal service - basically in terms of the presence of a physical entity or of the reorganisation in the functioning of the local offices - and regional development.

As a general rule, the Prefects noted that elected officials were worried by measures taken to reorganise the post offices (converting main post offices into sub-post offices, reduction of the opening hours of the offices) or decentralization of mail distribution.

Solutions proposed for the problems of providing service and handling the responsibility of La Poste for regional development included the diversification of operations of the small offices and the development of forms of partnership in order to maintain La Poste's presence in rural areas.

As part of the effort to improve the coordination process, there should be consideration given in particular to achieving better complimentarity between the postal coordination bodies and the Departmental commissions for the organisation and modernisation of public services, whose role has been confirmed by the law of 4 February setting guidelines for regional development.

2.4. The transportation and distribution of the press: readjusting the relations between economic partners

La Poste's contractual plan provides for the development of relations between the customer and the supplier that make it possible to take into account the expectations of the press and the financial constraints of La Poste. These relations are based on negotiations that include the quality of the service provided and the development of value-added services such as early morning delivery.

As part of the Government's efforts to consider how to provide Government aid to the press, the negotiations which are to be completed in 1995 will cover such subjects as developments in the system for aiding the transportation and distribution of the press, and particularly its system of tariffs (reforming its structure, and tariff realigning starting in 1995).

The Government, for its part, will make a contribution to La Poste which could amount to FF 1.9 billion annually for the period of the contractual plan.

The transportation and distribution of the press:

the contractual plan proposes the principle of realigning relations between economic partners

The tariffs for the print media were increased by 4.35% starting on 12 September 1994. This increase corresponded to an annual rise of 2.9% spread over 18 months. The last previous increase in press rates occurred in January 1993, and no rise is envisaged before the summer of 1995. This increase is in accordance with an agreement which has governed press-post relations since 1992 and which will continue to do so until the 1995-1998 contractual plan comes into force.

In addition, and given the current crisis in the French press (a fall in advertising income, increase in paper cost, etc.), on 12 July 1994 the Prime Minister requested that the Minister of Communications set up different working groups to draw up proposals to the Government in the following areas:

The four working groups submitted their conclusions to the Minister of Communications at the end of 1994. The DGPT was particularly interested in measures that could be taken by the Government at the beginning of 1995 in regard to rationalising the operations of the Joint Commission for Press Publications and Agencies (CPPAP - Commission Paritaire des Publications et Agences de Presse) and the development of new ways of aiding the delivery of the press.

Only single-issue delivery is really practised today. Only La Poste and the NMPP seem to be capable of undertaking multi-issue delivery. These two operators presented their delivery systems to several different working group meetings.

The working group reporters believe that delivery aid requires lowering the labour costs of the different delivery personnel, whose status is fixed by the law of 3 January 1991. These press delivery operators should also benefit from different Government programmes to enable people to return to work (job retraining agreements, job insertion contracts, employment solidarity contracts, fixed term contracts).

2.5. Mobilising all the resources of the state-owned company in order to serve the European Union

According to the terms of the contractual plan, La Poste, which employs more than 290,000 people around the country, and which uses the latest and the most diverse technology, should mobilize all its resources to serve the European Union by optimizing the management of its human resources and its investment policy.

La Poste should continue its human resources development efforts through a jobs classification system and through its solid policy on career education and training, while keeping its labour costs under control.

La Poste's employment policy should reflect the concern for social solidarity by promoting the employment of young people (particularly through apprenticeship programmes) and by the reintegration of the disadvantaged. Policy should also be aimed at avoiding conflict between the needs of the company and the expectations of the workforce, by developing, in coordination with the company's management and labour, programmes to manage the workforce that ease difficulties in job transfers and enhance staff mobility, while also encouraging the development of part-time work.

La Poste should also continue its programme of modernisation to enhance growth. It will be able to invest up to FF 9 billion in the period 1995-1997 for this purpose.

* * * *

This first contractual plan for La Poste shows the determination of Government authorities to provide this state-owned corporation with a clear, stable and dynamic management structure. This document, which commits each party for a period of three years, reflects for the first time the commitment of the Government to La Poste, as well as the latter's increased management responsibilities. The new economic relations between the Government and La Poste should make it possible to return steadily to financial health and then to stabilise this before the end of 1997.

Progress in putting a definitive end to official postal exemptions

The schedule of terms and conditions of La Poste set 31 December 1995 as the date for putting a definitive end to the official postal exemptions enjoyed by various Ministries for their exchanges of administrative mail as well as by the financial administrations for the delivery of notices to taxpayers.

There were preparations in 1994 for this deadline, including a letter by the Minister in charge of the post office to his colleagues and the establishment of a programme bringing together this Minister, the Minister for the Budget and La Poste. Part of this programme was the creation of a special task force responsible for carrying through an operational plan for this project.

This process, which will be continued in 1996 by adjustments to the regulatory framework, will mark an important stage in clarifying relations between the Government and La Poste.

Chapter IV