DHL 2002 Annual Report Download - page 42

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petitors are permitted to operate in the local post segment even within the boundaries
of our exclusive license. The resulting additional competitive pressure can be seen
from the fact that the RegTP had issued licenses to 1,255 licensees by the end of 2002.
On July 26, 2002, RegTP also announced its decision on the so-called price-cap
procedure. It set out the framework for postal rates for mail products requiring
approval, on the basis of which we will be obliged to cut prices or entitled to raise
prices, depending on the rate of inflation, in the period January 1, 2003 to December
31, 2007. The mandatory price reductions that took effect for the most important
mail products as of January 1, 2003 will depress our revenue and earnings by around
€300 million a year throughout this period. Furthermore, we will have to allow
customers and competitors partial access to our networks in accordance with conditions
determined by the regulator.
Despite increased electronic communication, we expect that, on balance,
volumes in the MAIL Corporate Division will remain stable due to market growth.
Competition for the EXPRESS and LOGISTICS Corporate Divisions has heated up
further, particularly on the European markets. We aim to counter the risks arising
from this development by integrating all of the Group companies which are active in
these markets under the DHL name, and developing joint products. An increase in
the risk of terrorist attacks could dramatically increase the cost of the necessary
insurance cover for DHL’s aircraft fleet.
The primary risks affecting the FINANCIAL SERVICES Corporate Division are
market price risk and counterparty (default) risk. These are intensively monitored and
managed by Postbank using a comprehensive set of instruments for risk management
in foreign exchange trading, securities trading and lending, among other things.
Compliance with the limits set by the Board of Management is monitored daily.
Postbank is currently establishing a risk system for operational risks to ensure that
compliance with the new requirements set out in the second consultation paper of
the Basel Committee on Banking Supervision Basel II is achieved ahead of schedule.
Legal risks arise from the competition case pending before the European
Commission. In the competition proceedings, which were initiated on the basis of
accusations of excessive letter rates made by the Deutscher Verband für Post und
Te lekommunikation (DVPT - German Association for Posts and Telecommunications),
we have presented the European Commission with detailed evidence of the reason-
ableness of our prices.
41
Management Report
Financial Analysis /Safeguarding the Future