Business Opinion: Something very unusual happened last Thursday. An Post, arguably the most calamitous of our State-owned companies, managed to do a bit of sound commercial business.

Its two overseas mobile phone top-up companies managed to command a purchase price of €85 million in a transaction with Alphyra. An Post originally bought the companies for €8.5 million in 2002 and has only pumped €7.5 million into them since then. So, based on these figures, a tidy profit of €69 million will now flow into its coffers.

For a company which has been reeling from negative news for so long, the latest deal must come as something of a relief for embattled chief executive Donal Curtin.

While it would be dangerous to predict a sustainable recovery just yet, the money will certainly provide An Post with a reasonable fund for paying off departing staff.

Getting staff numbers down has been the key area where the company has been falling down in recent years.

Seven years ago the company was employing 8,767 employees (excluding postmasters acting as agents). By the end of 2003, this had risen to 10,498. This amounts to an almost 20 per cent increase in staff numbers.

Obviously there is nothing wrong with this if the company is growing and increasing profits. But An Post's profitability - at an operating level at least - has been heading south for many years. In 1999 the company managed an operating profit of €13.3 million and in 2000 it stood at €9.7 million. Since then it's been red ink all the way, culminating in a staggering €42 million operating loss in 2003. How bad was this?

Well the company's chairwoman Margaret McGinley put it bluntly in the annual report. "This is the highest operating loss recorded by An Post since it was established as a State-owned commercial company in 1984."

The question is not what happened in 2003, but why were things let get so bad in the first place? Costs have been increasing voraciously at the company for some time.

Take pay, the most controversial area and you really get a sense of people being asleep at the financial wheel. In just three years, pay costs at the company went from €387 million to €501 million, an increase of almost 30 per cent. In the same period profits went through the floor and nobody seems to have shouted stop.

Thankfully, since former ESB executive Donal Curtin has come into the GPO as chief executive, some reality has started to take hold. But progress in getting pay costs down has been painfully slow.

Big unions at An Post like the Communication Workers' Union claim they are prepared to accept change and even voluntary redundancies but still the company has not managed to get the numbers down significantly.

As one trade unionist familiar with the firm recently told me: "An Post is one of the few companies where employees are climbing the walls trying to get out, but nobody will open the door for them."

The age profile of staff probably makes reducing numbers far easier at An Post than it was at companies like Aer Lingus. Nevertheless a commitment from management to cut staff numbers by between 1,000 and 1,500, made in September 2003, has yet to be delivered, although in mitigation this is mainly because the company's plans have become caught up in our convoluted industrial relations machinery.

One would think that, with An Post bulging at the seams with employees, the service we consumers receive would be up to scratch. Well no, actually. The latest report from ComReg on quality of service at An Post (yes some people read their reports) shows that only 72 per cent of normal letters are delivered the working day after posting. Considering ComReg's target is 94 per cent, this is a fairly lamentable performance.

ComReg says of "equal concern" is that 96 per cent of standard mail doesn't even reach its destination "by the third day after it was posted".

Considering An Post, in 2003, delivered 790 million letter post items, if this figure was applied to all types of letters it would mean about 30 million items a year end up rolling around somewhere in the An Post system for three days.

Clearly something is wrong, and, to be fair, Donal Curtin has acknowledged as much in a presentation before the Oireachtas Joint Committee on Communications in early February.

But what is to be done about all this, apart from selling off a few subsidiaries now and again? Clearly An Post must get into the cost control game, however belatedly.

It must also get a price increase from ComReg. But this time it should be tied to performance. It shouldn't be too difficult to construct such a model. Each percentage improvement in next day delivery should trigger a postage stamp price rise. An Post could draw down the price increases it has earned at the end of each year.

Of course even with a price increase in their back pockets, staff numbers cut back and a breakeven position by the end of this year, wider questions about An Post will not go away.

Back in 2001 Phil Flynn got into all sorts of hot water for suggesting An Post should be given a State subvention, particularly to support rural post offices and the like.

He may have had a point. The Government expects An Post to do all sorts of "social" type things, much of it included under the broad heading of the universal service obligation.

The Government seems intent on making An Post retain more than 1,400 sub-post offices for instance. Maybe they are right for wider societal reasons to insist on this, but maybe with electronic communication threatening old style "snail mail" they will have to pay for it too?

Whatever assistance An Post gets from now on - whether it be from ComReg or elsewhere - should be tied to performance, because performance is something we haven't seen from the company for many years.

Lets hope last week's sale was the start.