THE GOVERNMENT FAILS FOR THE THIRD TIME IN JUST ONE YEAR The privatization of the Romanian Post Office has ended before it has even begun

After the attempts to sell Oltchim and CFR Marfă, the privatization of the Romanian Post Office is the third biggest failure of the Government this year, as the privatization is over before it has even begun.

The government succeeds in being, or at least in looking like it is increasingly ineffective. Whereas in the case of Oltchim, the call for tenders was awarded to a winner without the deal actually going through, at CFR Marfă not even one investor company has qualified on the first attempt, meaning that a drastic loosening of the conditions of the call for tenders was necessary in order to draw up a short list, and for the privatization of the Romanian Post Office not even one investor bought the presentation documentation of the company.

What results will the Romanian government have to show to the mission of the IMF, about one month from now, if it fails to fulfill almost all of the conditions required by the representatives of the international institutions?

• Historic debts - an obstacle to investors, the government is trying to cancel as many of the arrears as possible

It would seem that the debts were also an obstacle in the privatization of Oltchim and of CFR Marfă.

Ion Smeeianu, the general manager of the Romanian Post Office National Company (Compania Naţională Poşta Română - CNPR), yesterday said, after the expiration of the deadline for the purchasing of the tender book, that it was the large debts of the of the Romanian state-owned post operator that have dissuaded investors from participating in its privatization.

He also said that the most important concerns that the potential investors have raised yesterday during the talks they had ,have concerned, among other things, aspects such as the historic debts of the company, which have increased significantly bigger following the audit of the Romanian National Tax Administration, completed on May 16th, 2013 and which also resulted in an additional 107 million lei in debt, (Ion Smeeianu has mentioned that this debt pertains to the 2003-2012 period), the legal framework regulating the operation of the universal service in the post segment, the spontaneous strikes of the employees, which have affected the activity of the Post Office, as well as the recouping of the expenses made for the achieving of the universal post service out of the clearing fund and the scheduling of the time allocated for the various stages of the privatization process.

Under these circumstances, the authorities are resorting once again to extreme measures: they plan to wipe the debts which the company owes the state, of 242.5 million lei, by converting them into debt, according to Mr. Smeeianu.

He said that the rescheduling of the payment of 107 million lei will also be taken into account - the debt recently uncovered by the ANAF. In today's Government meeting the following steps concerning the status of the privatization of the Romanian Post Office will be decided.

The company currently has total debts of 650 million lei, posting a loss of 52 million lei at the end of 2012, compared to 182 million lei at the end of 2011.

Concerning the overdue debts to the state budget, Ion Smeeianu stated: "The post office has tax debts of 242 million lei, an amount which also includes the debt calculated by the ANAF, of 107 million lei. Most of the debt is the result of a contract concluded with the union of the Post Office, during the term of general manager Dan Mihai Toader, which stipulated the granting of premium meal tickets. We will go to court to recoup the loss, which amounts to 42 million lei".

• The authorities have contacted close to 50 companies for the sale of the Post Office, but in vain

The CEO of the Romanian Post Office said that the representatives of the Privatization Commission have talked to "over 50 potential investors, representatives of international post administrations and of the Romanian and international investment funds".

"The long list of investors included the most important post operators and companies in the field from Europe, Asia and the US, as well as the most important local and global investment funds, which are interested in this kind of deals, due to the price, the state of the company and the geographic region. Later, the short list has included the potential investors which fit the profile of strategic investors (post operators) and of financial investors (investment funds), interested in investing in the Romanian Post Office and which, based on their expertise in the area, and in similar trades, would have been capable of handling the current challenges of the Romanian Post Office National Company - CNPR - in order to help turn it around", a press release of the Post Office states.

Alexandru Petrescu, the president of the Privatization Commission, yesterday said that "the short list" drawn up by the government had two companies left on it, "at least one of the 50 investors with which talks were held expressed their intention to participate in the privatization of the Romanian Post Office, namely a Romanian investment fund".

It bears reminding that in the beginning of March, in the proposed activity for this year, SIF1 Banat-Crişana has expressed its intention to participate in the privatization of the Romanian Post Office, and it was going to take the company public by listing it on the Bucharest Stock Exchange. The management of SIF1 justified its plan to do so by saying that the Romanian Post Office was a market leader in terms of volume, first of all when it comes to the services delivered by companies, it has potential for growth, a large portfolio of clients, it has opportunities to expand into other businesses, which are growing, and it also owns a platform for improving profitability, a 100% nationwide coverage and a strong brand.

It would seem that the majority of companies that the Romanian authorities have talked to concerning the sale of the majority stake of 51% of the shares of CNPR have been contacted by the Romanian party.

"It was a mixed situation - some (ed. note: investors) contacted us, and in the case of others, we called them", said Alexandru Petrescu.

The representatives of the Romanian Post Office have emphasized that the potential investors have requested the extension of the schedule for the privatization of the Post Office. The initial deadline of April 11th, 2013 for the acquisition of the tender books has been extended until May 28th 2013, at the request of the investors and with the approval of the IMF.

• Over 4,000 post office workers will be laid off

According to some estimative calculations, the Romanian Post Office is set to lay off about 4,400 employees, which will receive between 3 and 30 severance wages, depending on their seniority, according to Ion Smeeianu.

He said that most of the severance wages will be paid by the state budget, and the company will pay from one to six salaries for each employee that has more than 25 years of work with the company.

Between May 2012-May 2013, 2,340 employees left the company, through natural attrition.

The Romanian Post Office currently employs 32,000 employees, working in about 5,600 branches.

The layoffs will not apply to the employees that signed an addendum to their employment contracts based on which they would have a reduced work schedule, which involves the cutting of their wages by 25-50%. The average gross salary of a post office clerk gets is 1,700 lei. So far, 1,223 such addendums were signed, according to Mr. Smeeianu.

• After the Romanian Lottery, the Post Office comes with its own unprofitable contracts of tens of millions of Euros

The Romanian Post Office has come to the current situation due to the fact that it has concluded unprofitable contracts with various companies, during the terms of the former managers, said Ion Smeeianu, who mentioned that one of those contracts was the one with Porsche Mobility. The contract was worth 20 million Euros and concerned operational leasing services, for a four year period, as the leased vehicles were unable to be outfitted with adequate mobile security equipment.

Another money-losing contract is the one with "dummy" company STS, which swindled the Romanian Post Office out of 5 million Euros, according to Ion Smeeianu, who said: "They pledged to install POSs, they kept postponing and the contract was terminated due to one wrong letter, which is why the Post Office paid 5 million Euros in penalties. This is what is called a scam".

Promotional Services is another company which the CNPR concluded an unprofitable contract with, thus causing the company to lose 7 million Euros.

"It brings in second hand equipment which costs 10-15 dollars which it then sells for 150 Euros a piece, plus a software program of 6 million Euros, meaning a total hole of 7 million Euros", Smeeianu said.

Among others, the Post Office concluded another such contracts, of 5.8 million Euros, with the Alfa Medical center of Prahova, for medical services, another contract, of 7 million Euros, with Blue Air and a contract with several items with security company G4S, which, among others, provided security services at price of 2.5 Euros/employee per hour, as the new security contract assumes a price of 1.5 Euros/employee/hour, according to the General Manager of the Post Office.

He said that two of the money-losing contracts are still ongoing - the one with Alfa Medical, for which a termination solution is being sought out in court, and the one with G4S for the electric security and emergency intervention. None of the two contracts has any termination clauses.

• The Post Office wants to sell franchises

The Romanian Post Office is considering the creation of a franchise system. In areas where it is not profitable to run post offices, the service would potentially be franchised to companies, which would comply with all the requirements concerning the post office, Ioan Smeeianu said.

He said that the Romanian Post Office will sign a contract with Orange România for virtual mobile telephony services (MVNO) this week.

The Post Office will have a branch with which it will conduct insurance brokerage operations. The proposal will be discussed by the Board of Directors, the general manager added, who also said that the company would go into financial services: "We are considering three options - the creation of a non-banking financial institution (IFN), the cooperation with one or the cooperation with a bank. We will see".

The CNPR intends to computerize its offices, either through supplier credit, or by leasing IT&C equipment, Ion Smeeianu also said.

• The Post Office has budgeted zero profit

The budget of the Romanian Post Office stipulates a zero profit for this year. Staff expenses are expected to drop 6.3% in 2013, compared to last year.

"In the first four months we have had similar revenues to those which occurred before the liberalization of the market, starting on January 1st, 2013. Essentially, between January and April this year, the average of the monthly revenues of this company was 104.9 million lei. Also during the same interval, the average monthly loss was 1.3 million lei", the head of the Post Office said.

The shareholders of the Romanian Post Office National Company are the Ministry for Information Society, with 75% of the shares, and the Proprietatea Fund, with the remaining 25%.