Is Western Union Market Share Taking Market Share from Competitors?

Implications: I think the information presented in the article is consistent with Western Union picking up market share from competitors. Despite flat U.S. revenues over 05-07 period and likely near flat revenues from the U.S. in Q108 in part attributable to the Mexican results, Western Union has gained significant international market share over the 05-07 period and, with Q108 gains coming from China and India, this trend appears to be continuing (international revenues up 9% relative to total in 05-07 period and 43% in absolute terms). Absent a significant shift in the size of the market for money transfers, these gains would have come at the expense of competitors.

Analysis: While it is notable that international pretax profit margins are lower than those in the U.S., there are two important mitigating factors. First, international pretax margins have declined only 2% from 05-07 while U.S. margins declined 14%. Second international pretax margins are burdened by lower tax rates, making international after tax profit margins closer to those in the U.S. than they might appear at first glance. This suggests that Western Union’s gains in market share have not come from margin cutting, but from other sources such as superior marketing / servicing. This bodes well for Western Union in the near term given the relatively weak state of the U.S. economy relative to the international market.