It may be time for SingPost to hand over some, or all, of its domestic postal obligations to the State
SINGAPORE Post (SingPost) announced about three weeks ago that it is reviewing the commercial sustainability of its domestic postal business, after reporting its first annual loss for the shrivelling business.
The company posted an operating loss of S$15.9 million for the post and parcel segment for FY2023 to March, swinging from an operating profit of S$24.9 million for FY2022. It was squeezed by both lower turnover and higher costs, as delivery volumes continued to decline while labour, utility, fuel and conveyance expenses rose amid an inflationary environment.
The post and parcel segment weighed on SingPost’s profitability, causing its FY2023 bottom line to slide by 70.3 per cent to S$24.7 million, even as its transformation as a logistics player is bearing fruit.
The national postal service provider stated that it expects the post and parcel business, of which domestic postal business is a part, to be in the red this financial year too.
SingPost renewed the public postal licence in April 2017 for 20 years, at an annual fee based on 0.4 per cent of yearly audited gross turnover from provision of public postal services and subject to a minimum of S$150,000.
It has to comply with quality of service standards set by the Infocomm Media Development Authority (IMDA). For example, it must deliver at least 98 per cent of local basic letters by the next working day.
It is also tasked with providing and maintaining posting boxes and post offices throughout Singapore.
There were 56 post offices and 804 posting boxes as at December 2022, according to figures from the IMDA website.
SingPost is expected to provide national security and emergency services when needed, the licence agreement says.
Now that the post and parcel business is unprofitable, SingPost faces conflicting obligations. On the one hand, it provides a national utility of some importance. On the other, it is a listed company and needs to deliver shareholder returns.
SingPost was fined by IMDA for quality lapses some years ago, and subsequently had to ramp up manpower to maintain service levels.
Yet, it would be difficult for any public goods operator, if it continuously incurs losses in the provision of services, to find adequate resources to keep a system running well.
Best option
Sometimes, a nationalisation, or privatisation by a state-owned private entity, may be the best option for public users, taxpayers and shareholders alike.
Consider the formerly listed SMRT Corporation, which was delisted in 2016. Its core train and bus operations had also turned unprofitable shortly before the company was taken private by Temasek.
Since then, train services have become more reliable. Publicly available filings also show SMRT Trains generated S$11.2 million in after-tax profit from continuing operations for the financial year to March 2022, while its shareholder SMRT Corporation reported S$75 million in bottom line for that period.
It may be time for the relevant authority to consider taking over the staff and the vehicle fleet of the national postal service provider. SingPost could then be paid a fee to manage the business instead. Alternatively, the domestic operation could be nationalised – leaving SingPost to pursue growth in the international commercial space.
Some taxpayers might cry foul over the offloading of a loss-making business onto the government, but letter mail infrastructure is a public good that should be paid for with taxes.
