Deduction of records affected by the Madeira storm

Decision reached by ICP - Autoridade Nacional das Comunicações on the request submitted by CTT, pursuant to article 6 of the Universal Postal Service Quality Convention, of 10 July 2008, to deduct the records of non-priority mail, priority mail and postal parcels directly affected by the effects of the storm that hit the Autonomous Region of Madeira in February 2010

1. Pursuant to clause no. 8, paragraph 1b) of the Universal Postal Service Concession Contract, of 1 September 2000, as amended on 9 September 2003 and 26 July 2006 (Concession Contract) CTT - Correios de Portugal, S.A. (CTT) must provide the universal postal service ensuring its interoperability, continuity, availability and quality, the latter being specifically provided in accordance with parameters and levels of quality set out in the Universal Postal Service Quality Convention (Quality Convention) ¹, concluded between ICP - Autoridade Nacional das Comunicações (ICP?ANACOM) and CTT on 10 July 2008, under clause 12 of the referred Concession Contract and article 8, paragraph 5, of Law no. 112/99 of 26 July (Basic Law) ², as amended by Decree?Law no. 116/2003 of 12 June.

2. Article 6, paragraph 1, of the Quality Convention lays down that ''should any force majeure or phenomenon situation take place, the burst and evolution of which are clearly outside the control of CTT, and have an impact on the quality of service provided by CTT, the latter may request, for the purpose of calculation of QSI […], the deduction of records for the concerned periods of time and geographic flows''.

3. Paragraph 2 of article 6 establishes that force majeure or phenomenon situations mentioned in paragraph 1 mean unpredictable or insurmountable natural events and/or facts attributable to third parties, that are triggered, evolve, or the effects of which occur regardless of CTT's will and ability to control, such as war, subversion, epidemics, cyclones, earthquakes, fire, lightning, floods, general strikes and any other similar events that may impair normal conditions of clearance, sorting, transport and distribution of mail items.

4. According to paragraph 4 of article 6, the request for deduction activation must be submitted in writing by CTT, together with the respective grounds, within 60 days at the most from the date on which the events have taken place.

5. Paragraph 5 of article 6 establishes that the decision as to whether CTT's request should be taken into consideration is incumbent upon ICP?ANACOM, and must be notified to CTT within 30 days at the most from the date on which such request is received. In case ICP?ANACOM decides to reject this request, the Authority shall duly justify its decision. Regardless of the request for deduction, CTT must undertake to try to find the best alternatives for the period the situations mentioned in paragraphs 1 and 2 of article 6 take place.

6. It is a well-known fact, having received wide media coverage, that the Madeira Island was struck by a storm on the dawn of 20 February, involving heavy rains and rising sea levels, which caused flooding and landslides along the slopes of the island, especially on the southern side, where the city of Funchal is located.

7. CTT informed, as reported by the media, that on 20 February the Madeira Island suffered from a harsh storm with catastrophic effects, on account of severe floods and landslides which affected the whole island, and particularly the devastating flash flood in the Funchal area, which caused severe human and material damage and which paralysed the economic activity of the region for several days.

8. According to CTT, these events hit several postal infrastructures, having several post stations been flooded, however the building where Madeira's sorting centre (centro de tratamento da Madeira - CTM) is installed was the most affected by the flash floods occurred in Funchal. Also according to CTT, in addition to power, water and communication shortage, the floods in the referred building prevented temporarily this company from operating, thus affecting the regular handling and distribution of mail items to and from the Autonomous Region of Madeira.

9. CTT informed that an immediate action plan was put in place in order to minimize the impact of the referred situations, which namely included: cleaning and removing sludge; recovering and checking equipment carried by the flood; surveying the building infrastructures; relocating CTM temporarily on the upper floor of the building, in order to enable minimum operating conditions on 23 February; during the month of February, using alterative vehicles to replace damaged distribution vehicles.

10. CTT refer that, notwithstanding the above-mentioned measures, the irregular operation of the CTM led to mail items routing delays, which affected the performance of quality of service  in the Autonomous Region of Madeira.

11. Specifically, CTT inform that, given the different services' transit times, the CTM standstill on 22 February affected the regular quality performance of mail items sent to the Autonomous Region of Madeira, as far as ordinary mail and postal parcels are concerned, between 17 and 22 February, inclusive, and as regards priority mail between 18 and 22 February. The quality of mail items sent from that Autonomous Region, as regards ordinary mail and postal parcels processed between 18 and 22 February, and priority mail processed between 19 and 22 February, inclusive, was likewise affected.

12. In the light of the above, CTT requested ICP-ANACOM, pursuant to and for the purposes of article 6 of the Quality Convention, to deduct, for calculation of quality of service indicators (QSI) for February 2010, the records of ordinary mail, priority mail and postal parcels referred to in the preceding paragraph.

13. CTT argue that the referred situation is a force majeure situation, of irregular nature and causes, the burst and effects of which are clearly outside the control of the company.

14. The record deduction requested by CTT would imply (Table 1) that the performance in February 2010 for QSI1 (Transit time for Non-Priority Mail), QSI3 (Transit time for Priority Mail) and QSI9 (Transit time for Non?priority Parcels) would improve.

<sup>Notes: RW - Relative Weight; Min. - Minimum Value; Obj. - Objective Value

a) Deduction of mail items sent on the following dates:
- from 17 to 22 February (inclusive) all mail items to the Autonomous Region of Madeira;
- from 18 to 22 February (inclusive) mail from the Madeira Island to the Mainland and to the Autonomous Region of the Azores.</sup>

^{b) Deduction of mail items sent on the following dates:
- from 18 to 22 February (inclusive) all mail items to the Autonomous Region of Madeira;
- from 19 to 22 February (inclusive) mail from the Madeira Island to the Mainland and to the Autonomous Region of the Azores.}

^{c)  Deduction of mail items sent on the following dates:
-  from 17 to 22 February (inclusive) all mail items to the Autonomous Region of Madeira;
-  from 18 to 22 February (inclusive) mail from the Madeira Island to the Mainland and to the Autonomous Region of the Azores.}

^{As regards non-priority mail and parcels sent on 17.02.2010, the 3rd working day (D+3) after their introduction into the postal network - agreed standard service - corresponds to 22.02.2010.}

^{As regards priority mail sent on 18.02.2010, the 2nd working day (D+2) after their introduction into the postal network - agreed standard service for mail sent to and from the Autonomous Regions – also corresponds to 22.02.2010.}

^{D+X means delivery up to X working day(s) after deposit of mail items at reception points of post establishments.}

With or without the deduction of records, QSI, QSI3 and QSI9 figures for February  2010 exceed annual Objective values defined in the Quality Convention.

15. Therefore, taking into account information conveyed by CTT by letter no. 51511, dated 30.04.2010 as well as provisions of the above-mentioned paragraphs 1 and 2 of article 6 of the Quality Convention, and whereas:

a)  The Madeira Island was struck by a storm on the dawn of 20 February, with  heavy rains and rising sea levels, which caused flooding and landslides along the slopes  of the island, especially on the southern side, where the city of Funchal is  located;

b) Several postal infrastructures were flooded, namely post stations and accesses to and ground floor of the building where Madeira’s sorting centre (centro de  tratamento da Madeira - CTM) is installed, which temporarily prevented this  company from operating, thus affecting the regular handling and distribution of  mail items to and from the Autonomous Region of Madeira;

c) The referred disturbances caused by the storm, and notified by CTT, affected the performance of ordinary mail and postal parcels sent to the Autonomous Region of Madeira between 17 and 22 February, inclusive, and of priority mail sent  between 19 and 22 February, as well as that of ordinary mail and postal parcels  sent from that Autonomous Region between 18 and 22 February, and of priority  mail sent between 19 and 22 February inclusive, notwithstanding the  implementation by CTT of a set of measures intended to minimize their impact;

d) The referred disturbances qualify as a force majeure situation, which was  triggered, evolved, or the effects of which occurred regardless of CTT’s will and  ability to control, impairing the regular conditions of clearance, sorting, transport  and distribution of mail items to and from the Autonomous Region of Madeira, on the working days immediately preceding and following the storm;

e) Pursuant to article 10 of the Quality Convention, CTT must send to ICP-ANACOM  quarterly reports, by the end of the month following the end of the quarter, with  the evolution of values achieved for QSI, so that such values may be followed up  and monitored,

the Management Board of ICP-ANACOM, in the exercise of powers conferred under article 6, paragraph 1 b), d), h) and n), and article 26 b), all of its Statutes, approved by Decree-Law no. 309/2001, of 7 December, and pursuant to paragraph 5 of article 6 of the Universal Postal Service Quality Convention, of 10 July 2008, hereby determines as follows:

1. To grant the request submitted by CTT - Correios de Portugal to deduct the records of ordinary mail, priority mail and postal parcels directly affected by the effects of the flash floods which occurred in Madeira in February 2010, for all flows to and from this Autonomous Region, for calculation of quality of service indicators (QSI) defined in the Universal Postal Service Quality Convention.

The referred deduction concerns only:

a) Mail items to the Autonomous Region of Madeira: ordinary mail and postal parcels sent between 17 and 22 February, and priority mail sent between 18 and 22 February;

b) Mail from the Autonomous Region of Madeira: ordinary mail and postal parcels sent between 18 and 22 February, and priority mail sent between 19 and 22 February.

2. To order CTT, when calculating QSI figures for the whole year of 2010, pursuant to article 10 of the Quality Convention, to submit to ICP-ANACOM annual QSI figures achieved with and without the deduction of the referred records.

3. To order CTT to submit to ANACOM, within 10 working days:

a) Pursuant to the referred article 10, QSI, QSI3 and QSI9 figures obtained for the 1st quarter of 2010, with and without the deduction of the referred records;

b) Detailed information on each of the records deducted by CTT in the calculation of the respective indicators, namely: mail item identifying code, expected and actual dispatch date, mail item origin and destination, distribution date, transit time and validity of registration for the purpose of calculating the respective quality of service indicator.