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PT Pos moves on after bankruptcy hoax
Gilarsi Wahyu Setijono (Valerie Halim)Panicked and appalled, netizens shared last week news of PT Pos Indonesia, which has served as a postal service company since the Dutch colonial era in 1906, allegedly going bankrupt
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Gilarsi Wahyu Setijono (Valerie Halim)
Panicked and appalled, netizens shared last week news of PT Pos Indonesia, which has served as a postal service company since the Dutch colonial era in 1906, allegedly going bankrupt.
The news, while of course untrue, nevertheless sheds light on the company’s place in the world today and the notion that private services, such as JNE and Tiki, are much more popular.
For Pos, it is a gentle reminder about the importance of striking a balance between serving the public as a state company and making profit as a commercial entity. It is also a reminder about the importance of conveying messages to the public.
“We are still able to pay for everything we are responsible for. If it was said we went bankrupt, that’s just wrong,” said Pos president director Gilarsi Wahyu Setijono in a limited media briefing recently. The company was still booking profits, he added.
While the news of bankruptcy may be false, Pos is not immune to fiercer competition from courier businesses and changes in technology, which is slowly killing off messenger and postal services that struggle to adapt and stay afloat.
The past few years in particular had been tough, Gilarsi admitted, as Pos needed to make good on its public service obligation (PSO) at a time when the private sector continued to aggressively expand delivery services.
Doing business versus public service
Under the government’s public service obligations, Pos is tasked with operating 2,400 offices in the outermost, frontline and disadvantaged (3T) regions.
The firm cannot charge prices that are too high for its services as it is obligated to comply with rules set by Communications and Information Ministerial Regulation No. 29/2013, which mandates that Pos provide delivery services to all parts of Indonesia under the Universal Postal Service (LPU) program.
“Because of the PSO, we are currently operating many offices across areas that are, to be honest, not commercially profitable,” said Gilarsi, who took the helm of Pos in 2015 after recovering the financial health of leading local Muslim-wear brand Shafira. He was appointed by State-Owned Enterprises Minister Rini Soemarno.
“What does that mean? The cost we use to operate the offices in 3T areas and the cost for operating the LPU service is much bigger than our revenue,” he added.
The tax for the postal service has remained the same since 2013, without adjusting for inflation, consumer demand and other operational costs such as courier salaries. For instance, 20-gram deliveries are charged Rp 3,000 (21 US cents) flat across the archipelago. Sending letters from Jakarta to neighbor Bandung, for instance, costs the same as sending them from Jakarta to the far-lying region of Papua.
“LPU tariffs are lower than the costs,” said Gilarsi, who spent years abroad working in strategic positions at multinational corporations such as Philips Lighting and Merrill Lynch.
Although Pos received an annual government grant to carry out its PSO, its costs outweigh the subsidies. In 2018 alone, the cost gap was Rp 600 billion from a total of around Rp 1 trillion in operational costs for the PSO. The PSO fund was Rp 345 billion.
To narrow the cost deficit, Pos utilizes a cross-subsidy scheme with its more profitable businesses, such as its courier service. The increasing cost burden to operate PSO and LPU services is what has primarily squeezed Pos of its profits in the past few years.
Its net profit declined in 2018 to Rp 127 billion, compared with Rp 355 billion in 2017 and Rp 429 billion in 2016. That is despite an increase in revenue to Rp 5.5 trillion in 2018 from Rp 5.07 trillion in 2017 and Rp 4.87 trillion in 2016, company data show.
As of now, Pos’ core business encompasses courier (postal and package) and financial services. Backed by the booming e-commerce industry, courier revenue grew 14 percent year-on-year (yoy) to Rp 3.04 trillion in 2018. However, its financial services recorded a 7.7 percent decline in revenue last year to Rp 898 billion.
Adding to the costs was Pos’ transformation into a full-fledged company from a government agency (Jawatan) previously. In 2018, the company had to pay a total of Rp 150 billion in pension funds for former employees when the firm was still a government agency.
To maintain relevance in today’s world of delivery services, Pos is looking to reform all aspects of the company — from its business model and human resources to its subsidiaries and how it develops new products.
“We need help. Pos is not a small company, it is massive as our services cover everywhere from Sabang to Merauke,” said Gilarsi, calling on the government as a primary stakeholder to sit together with Pos to talk about assisting the company in tackling its problems.
“We cannot transform on our own. It will be a challenge for us if we have to do it alone.”
Options explored
The State-Owned Enterprises Ministry stood by Pos and would support whatever efforts were necessary, said the ministry’s deputy for mining, strategic industry and media, Fajar Herry Sampurno.
“The most important thing is the transformation of the Pos business model from postal service to package delivery service. Also, it is very important to transform the business model as a whole, including its subsidiaries, human resources and finances,” said Fajar.
The ministry promised to discuss the matter with the Communications and Information Ministry to explore the need to revise any regulations related to Pos business, he added.
Pos was also exploring several business models of postal companies around the world that had stayed relevant, said Gilarsi.
Royal Mail in the United Kingdom, for instance was a state-owned company that was privatized in 2013 to improve competitiveness. The same went for Deutsche-Bundepost in Germany, which was restructured in 1995 into three publicly traded corporations, one of them being Deutsche Post AG or Deutsche Post DHL Group.
“There are several models that we are considering,” Gilarsi said.
The Pos subsidiaries with potential for growth were Pos Logistics and Pos Property, he added. In the property sector alone, Pos is planning to build commercial buildings for 28 land assets that can be leased to a third party in the future.
Moving forward
Marketing expert Yuswohady said to stay relevant in today’s business world, state-owned enterprises including Pos needed to start exploring beyond their core business, valuing flexibility over a narrow business model.
Pos is an asset-rich company with plenty of physical assets — or buildings — across the country, resulting in big operational costs, he added. Such a business model is less relevant with today’s business, where many companies prefer to be light on assets. Therefore, implementing a partnership system like technology decacorn Go-Jek or implementing a shared asset or third-party system like courier service firm JNE might be more suitable.
For Pos, Yuswohady said the transformation could succeed by cutting operational costs through asset-reducing measures, or accelerating noncore business growth.
“What needs to be done is to identify businesses that are beyond the core,” said Yuswohady, adding that Pos should consider extending its core business and expanding its noncore businesses. “If necessary, create a subsidiary to handle this autonomously, don’t get mixed up in the business.”
The property sector was an area of promise for Pos, he added, considering that the company had many physical assets nationwide. “Pos has a handful building assets with prime locations. It must be possible for them, for example, to develop a hotel business,” said Yuswohady, author of over 40 books, including Consumer 3000: Consumer Revolution.
Transformation or developing a noncore business was often challenging for SOEs, which needed to secure approval from multilayered government institutions, he added. However, several SOEs have shown success in doing so, including state-owned airport operator Angkasa Pura II with its hotel business and state-owned pawnshop company Pegadaian with its hotel and coffee shop services.
