German Post may cut 10,000 jobs

FRANKFURT, Germany -- Deutsche Post, Germany's dominant postal company, may have to axe 10,000 jobs if the regulator demands a drop in postage prices.

The company, which owns international express courier DHL, also said the measure could dent profits by 1.5-billion-euro ($1.49 billion) in 2007. The price reductions would lead to a drop in revenue of 300 million euros in 2003.

German telecommunications and postal regulator RegTP said on Tuesday it is calling on Deutsche Post to lower charges on some standard letters and other products to boost competition in Germany. The regulator is expected to ask for a cut in postcard and letter charges of 7.2 percent, Reuters said.

Deutsche Post, which is still 67 percent owned by the German government, said along with the job losses it may have to close post offices and raise prices on other services.

The company's stock price, which has come under pressure in recent months because Europe's biggest economy is struggling to recover from a recession, fell 5.6 percent to 12.47 euros in mid-morning Frankfurt trading on Wednesday.

"We have always stressed that the cost developments of the past years and the burdens of Deutsche Post, especially the country-wide infrastructure, leave no room for a price reduction," Chief Executive Klaus Zumwinkel said.

Deutsche Post posted core operating profit of 785 million euros in the first three months of this year but cautioned that it faced a "major challenge" in 2002 to beat last year's 2.6 billion euros.

The company also faces stiff competition from new rivals as the European Union moves to liberalise the market. The European Commission, the executive arm of the EU, ordered Deutsche Post to repay 572 million euros ($547.9 million) in state aid that the company used to subsidise its loss-making parcels business.

Consignia, Britain's struggling postal operator, said last month it would axe 17,000 jobs after posting a £1.1 billion ($1.62 billion) loss.