THE DISTILLERY: Private Post?

The commentariat is divided on the possibility of an Australia Post privatisation, and whether Fahour's pay rise too much.

Could Australia Post be privatised? One commentator leaves that door open, while two others slam it shut. Regardless, Australia’s Postmaster General Ahmed Fahour is doing a solid job delivering the government-owned company to the digital age, although that paycheque he receives looks a bit steep.

Also in Friday’s week-ending slammer from The Distillery, Kerry Stokes has run into a regulatory brick wall in the form of the consumer watchdog when it comes to pay-TV. But as one commentator explains, the media billionaire’s decision not to frustrate the Consolidated Media Holdings (CMH) sale to News Limited (owner of this website) might say something about the coming revolution of IPTV.

But first, Fairfax’s Malcolm Maiden explains how Australia Post’s Fahour is managing the steady decline of ‘snail mail’ by taking on Computershare with digital mail delivery services and package companies Toll and TNT.

"StarTrack is an important deal for Fahour because with full ownership Australia Post is the biggest player in the parcel express market, with a share of about 35 per cent. Toll follows with about 30 per cent, and TNT has a share of about 20 per cent. It's a very competitive business, but it is growing quickly. Australia Post's parcel volumes have risen by 24 per cent in three years, and Fahour expects they will rise at a compound rate of 10 per cent a year between now and 2020. That would only be on the back of a lift in online retail sales to about 10 per cent of total sales, he says, a level the US has already reached. The business is a mix, and a balance of them. It's got that slowly dying snail-mail operation too. But Fahour is creating a growth story that makes the group a floatable prospect, should a government be looking for ways to raise money, as this federal government is, and any new one will be.”

It should be said that Maiden doesn’t flat out say the government will privatise Australia Post, but he doesn’t really lend any weight in his argument against the notion. The Australian’s John Durie argues that political realities mean Australia Post will probably remain in government hands for some time, though he agrees with Maiden that the numbers make it look very floatable.

"The monopoly regular mail business is losing increasing amounts of money and politically is a service many in the community expect to continue into infinity. The mail business has a horrendous universal service obligation, which would worry some, and when it wants to lift its prices it has to seek ACCC approval. Telstra has operated under much the same rules. Still it becomes easier to understand why even the Liberal Party doesn't have the potential multi-billion-dollar sale on its agenda. Which of course is not to say the asset shouldn't be privatised because there is no doubt the taxpayer would be better off with the assets off the government's books.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd says Fahour might be a great executive and deserve a pay increase, but 22 per cent bump a total of $2.7 million is a bit much.

"Fahour’s pay may well be justified if Australia Post were headed for privatisation, but that is not the case…Fahour deserves plenty of praise for transforming a business suffering heavy losses because of the decline in use of traditional mail and the costs of providing statutory services under its guiding legislation. However, his pay is another stratosphere relative to what is being paid to others in his industry. In the UK, the chief executive of Royal Mail, Moya Greene, who is facing the same challenges as Fahour, was paid £1.1 million ($1.7 million). The Royal Mail had revenue of £9.5 billion in 2012 and made a profit before modernisation costs of £442 million. Its bottom line profit was £253 million. Another comparison that brings home the excessive pay at Australia Post is with one of the world’s leading postal and express companies, Deutsche Post. It is a former government owned provider that was privatised. Its chief executive, Frank Appel, was paid €3 million ($3.7 million) in 2011. Deutsche Post had revenue of €52.8 billion and profit of €2.4 billion in 2011.”

Fahour is not an outlier. Another prominent public servant, Reserve Bank Governor Glenn Stevens is paid more than twice that of his counterpart at the US Federal Reserve Ben Bernanke.

There are always two sides to the executive remuneration debate. Either the subject in question is overpaid, or their peers are underpaid. But props have to go out to Boyd for tackling this topic with an executive that is hard to find fault with.

Elsewhere, Fairfax’s Adele Ferguson says the real question going into yesterday’s decision by the Australian Competition and Consumer Commission (ACCC) was whether Seven Group billionaire Kerry Stokes would sell his stake in CMH, or stick around for a bit of mischief.

"That he chose to sell his stake speaks volumes about his close relationship with James Packer, his respect for News Ltd's Kim Williams and his canny ability to understand that the next big thing in media is internet protocol television (IPTV), which he is developing within the group Yahoo!. The next big story to unravel in the media is free-to-air TV and IPTV. A key measure of how free to air (FTA) is faring will be the premier of the second season of Homeland, which picked up six Emmy awards, including best drama, on the Ten Network on Sunday. The series is already running in the US and, if it doesn't rate as well as expected, possibly due to illegal internet downloads from US websites, it will raise a big question mark over the TV model, particularly big output deals with US production houses. TV stations and Foxtel have been trying to resolve this by bringing forward the screenings to tie in closer to US premiers, but even a few weeks' delay is having an impact on internet downloads that are excellent digital quality and have had the advertisements removed.”

Business Spectator’s Cliona O’Dowd also ponders what Stokes might do with the money, particularly when the value of media assets has been beaten down.

"The conservative option would be for Seven to take this on board and pay off some of its debt rather than spending hundreds of millions to take Seven West private. Still, Stokes is known as a punter who likes to take a gamble so it would hardly shock the market if a Seven West bid was tabled in the coming weeks or months. In fact, if Seven West’s share price stays at its current lows, the market will likely be expecting such a move.”

The Australian’s Nick Tabakoff says the focus now shifts to News Limited and Telstra Corporation, specifically whether the pair can work out a triple-play of pay-TV, landline and broadband that works for both of them.

And The Australian’s Bryan Frith writes that the $1 billion that James Packer’s Consolidated Press Holdings will receive is another piece in the gaming billionaire’s puzzle to build a top casino in Sydney.

"Packer wants Crown to move into the VIP high-roller market in Sydney and has entered into an exclusive dealing agreement with Lend Lease in relation to the development of a world-class six-star hotel at Barrangaroo South, which would incorporate a VIP-only gaming facility, and has been assiduously wooing the NSW government. Crown has built up a stake of 10 per cent in Echo and has applied for regulatory approval to go to 25 per cent, beyond which point it would need further approval. The difficulty for Crown is that Echo holds an exclusive casino licence until 2019 for its Star casino at Pyrmont, which has recently undergone an extensive makeover aimed at attracting the Asian VIP market and is now starting to hit its straps and is taking market share from Crown.”

Speaking of which, The Australian’s Glenda Korporaal is keeping tabs on the Lim brothers, Joey of Hong Kong and Benjamin of Malaysia, who checked out Echo’s The Star casino which is the object of the affection of their uncle as well as Packer.

Fairfax’s Michael Pascoe again pleads with readers to look beyond the monthly employment figures because they tend to jump around a lot. Although he does ask whether the Reserve Bank knew about the numbers before the rate cut last week. The Australian Financial Review’s Jennifer Hewett agrees that the monthly figures are volatile, but adds the numbers do point to a few cracks in the Australian economy that are "likely to widen over the next year”.

Although, not to the same extent as Greece. They just hit a jobless rate of 25 per cent, ouch!

Meanwhile, The Australian’s economics correspondent Adam Creighton has a great context for the increasing visibility of negative public opinion via social networking – economics.

"Rather than spend an hour writing a letter to the editor of a newspaper people would simply forget and move on. Time is money. Demand has not shifted. People have not suddenly become more inclined to moralise – science and technology have only altered the means, not the ends, of human behaviour – but the cost of supplying moral outrage has collapsed.”

Creighton isn’t saying anything particularly new, but it’s a charmingly nerdy way of doing it…and it makes total sense!

The Australian Financial Review’s Matthew Stevens believes Discovery Metals has been brave by knocking back a takeover offer than represents a more than 50 per cent premium.

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