Can snail mail survive Internet boom?

Post in Russia has had a difficult time in recent years, both for users of the antiquated service and for the government underpinning its financial position. It lost $US 186 million in 2007. But this is set to change with the appointment of a new head and

One of the oldest and largest government owned enterprises – Russia Post – is entering a reconstruction phase. Currently it includes almost 90 affiliates with 42,000 outlets, but even these figures don't help it to make profit.

The latest move to do something about the post was to place former Sberbank CEO Andrey Kazmin in charge. He says the first thing to change will be the financial losses.

“Russia Post will not become a bank in the future. It will have a range of services, but the main service will be delivering post. Financial services will be a part of these. And we do plan to increase the profitability of Russia Post by enlarging the number of financial services and updating the sector,” Kazmin said.

“I think Russia Post will be able to stop making losses by the end of 2008,” he concluded.

It will be focusing on services such as money transfers and loan payments, and will offer some banking services in regional Russia.

“Currently, Russia Post has a lot of problems. And it will take from three to five years to finish the reconstruction process. However, by the end, with the financial services in place, it can compete with Sberbank in places where there are no banks at all,” said Anatoly Aksakov, the head of Association of Regional Banks.

The restructuring of Russia's postal system will take up to five years, according to experts.  

Kazmin's call to make it a state corporation makes it potentially a longer term issue.  The move would help Russia Post's voice inside government – which will not only add weight to calls for investment, but also help it deal with changing laws, while maintaining its social functions.  

Russia Post is known for its slow service, long waiting lines and sometimes even rude staff.

The task for the new coming management is to turn around the organisation, creating a modern, efficient, and customer-focused enterprise which delivers a return.

It's expected that more concrete proposals for Russia Posts transformation will be unveiled in March.