4. Principle of cost orientation and affordability

The Price Convention lays down that the prices of the universal service must comply with the principle of cost orientation, which must be applied progressively, so as to allow for a gradual rebalancing of tariffs and to ensure the affordability of prices (article 2, paragraphs 1 and 2).

Discounts and special prices must also take into account the avoided costs compared to the standard service that provides all operations concerning clearance, sorting, transport and distribution of postal items (article 7, paragraph 2).

Prices of postal services that integrate the universal service provision must, on the other hand, comply with the principle of affordability to all users.

The methodology which ICP-ANACOM has adopted for analysing proposals of prices of the universal postal service has focused, implicitly or explicitly, on (i) taking the basket of services as a whole, while bearing also in mind cost orientation according to the service or group of services, (ii) the overall margin, which in case of being positive should decrease or ultimately not increase.

As regards the analysis of cost orientation of prices in the price proposal under consideration, this Authority takes the view that:

a) In case the margin of the basket of services concerned is positive for 2012, a price proposal for 2013 will comply with the principle of (progressive) cost orientation of prices where the price proposal does not lead to an increase of the margin of services between 2012 and 2013;

b) The margin to be considered is the relative margin (in %) compared to revenues, as this is the margin that measures the weight of the margin compared to total revenues;

c) Bearing in mind that some economic and financial policy measures have created a direct impact on CTT’s costs, and consequently, on margins it achieved, leading to some fluctuations that may not be sustainable, the margin for 2012 to be considered in the assessment of the compliance with the principle of cost orientation must be the margin corrected for the temporary effects associated to the (non) payment of holiday and Christmas bonuses for 2012 and cuts in that year in wages above 1500€. Therefore, for the purpose of the analysis of the evolution of margins in the scope of the this price proposal, the margin for 2012 to be considered must be the margin corrected for, in this case increased by, the values of holiday and Christmas bonuses for the work provided in 2012, and the value of cuts in that year in wages above 1500€;

In fact, it must be recalled that CTT’s costs for 2011, 2012 and 2013 are influenced by changes in CTT’s staff costs required by the measures of the State Budget (SB) from 2011 to 2013, aimed at public companies with a majority public shareholding or entirely public, and associated to the Programme of Economic and Financial Assistance, as well as by the prospects for the privatisation of CTT in 2013, such measures being exogenous to the company.

Not only do CTT’s costs for the period 2011-2013 reflect cuts in wages above 1500€, but costs for 2011 reflect also the failure to pay the Christmas bonus for that year¹, and costs for 2012 reflect the failure to pay the holiday² and Christmas³ bonuses. On the other hand, the anticipated costs for 2013 presented by CTT⁴ include the replacement of the Christmas and holiday bonuses for 2013, the latter through the specialisation of the cost to be paid in 2014, to be replaced in view of the company’s privatization in 2013 and due for the work performed in 2013.

Consequently, while CTT's costs, reflected in the company’s financial accounts, include in 2011 the payment of one of the bonuses, those for 2012 do not include any of the bonuses and those for 2013, estimated by CTT, include both bonuses.

d) Moreover, on a service-by-service basis, in case there are services for which a positive margin increase or a negative margin deterioration are estimated, likely from the outset to enhance situations of excessive rents or predatory prices, respectively, ICP-ANACOM will bear in mind CTT’s proposal for variation of prices for the service concerned, as well as whether the margin is close to zero and whether significant traffic reductions inducing increases in unit costs are anticipated. For example, if a given service is estimated to present a negative margin deterioration but CTT presents a price increase proposal, such proposal may be deemed, within certain limits, to be in conformity, in the light also of the natural uncertainty associated to the evolution of costs in 2013. Likewise, if a given service is estimated to present an increase in its positive margin but CTT does not propose to increase the respective prices, such proposal may be deemed, in specific circumstances, to be in conformity.