TALLINN - Estonia's state-run postal service, Eesti Post, has announced that it would close 44 post offices throughout the country as part of a drive to trim losses and make the company more effective.
The decision highlights the deepening crisis in the Baltic states' state-run postal service operators, which are increasingly seen as money pits that have been slow to adjust to the age of electronic communication.
Eesti Post's supervisory board ruled that the 44 post offices must be closed by Nov. 1 as part of the company's preparations for planned deregulation of the EU postal market in 2009. The company currently has 540 post offices.
"The decision on the closure is naturally unpopular, but Eesti Post must achieve sustainability and prepare for 2009 when the post market opens," said Meelis Atonen, chairman of the supervisory board.
He said talks had been tense, but the board fully supported management's reform plans, which include a wholesale restructuring of the company's operations.
In the words of Ahti Kallaste, an Eesti Post board member, the restructuring will affect every sphere 's distribution, logistics, advertising, direct mailing 's so that each can "independently provide sustainable services."
Kallaste told the Eesti Paevaleht that management will have to provide the supervisory board with a reform program, which in the end could entail reorganizing Eesti Post into separate units or a holding company with subsidiaries.
"We are now like a big kolkhoz," he added, referring to a Soviet collective farm.
Eesti Post's struggle to adapt to the modern communication age reflects the dilemma facing Latvijas Pasts and Lietuvos Pastas, which are both mired in losses 's worse than Eesti Post's 's and facing a complete operational overhaul.
In Latvia, where the state-owned post office lost 7 million euros last year, the government decided in August to reorganize the company into a "postal bank" that will operate in conjunction with a strategic investor. Dozens of small post offices will be closed and a universal postal fee will be introduced as part of the plan. Many analysts and bankers, however, are skeptical about the plans.
In Lithuania, the state-run postal operator announced that its first-half 2007 losses soared 2.3 times year-on-year to some 7 million litas (2 million euros). Second-quarter sales dropped 6.4 percent to 22 million litas, which contrasts those in the private sector, where the volume of mail service-related sales soared 23 percent in the second quarter.
Indeed, more consumers are opting to turn to the private sector for mail and delivery services.
In Estonia, Eesti Post decided in August to improve effectiveness and cut 10 percent of its expenditures this year, though managers admitted that even this was not enough.
As Kallaste said, "From the point of view of efficiency we could close half the post offices in Estonia, but the law says that there must be a post office in every rural community."
According to Eesti Post's reorganization plan, the company won't have to deal with real estate. "We should specialize in mail and logistic services alone. We can rent premises for post offices," Kallaste said.
Eesti Post posted a loss of 20.4 million kroons (1.3 million euros) in 2006.
Lietuvos Pastas reported 8.2 million litas (2.4 million euros) in losses for the same period.