World: Media Analysis - Axel Springer looks to expand in the UK and Eastern Europe

By Emma Barns, campaignlive.co.uk, Friday, 21 May 2004 12:00AM

Telegraph offer is a timely opportunity for the German publisher.

Germany's biggest newspaper publisher, Axel Springer, has been in the media spotlight over the past few months. Following a successful year at home and forays into the Eastern European market, it is now stepping up a level and, in registering an interest in The Daily Telegraph, it is once again aiming to expand into the English-speaking market.

Earlier this year, it joined the bidding for Hollinger International, the publisher of The Telegraph, The Chicago Sun-Times and The Jerusalem Post. Axel Springer, which refuses to make any comment about the process, is reportedly offering between £600 to £700 million for The Daily Telegraph and Sunday Telegraph, as part of a joint bid with the US billionaire Haim Saban for all of Hollinger's assets.

These UK ambitions are not without precedent. Five years ago, Axel Springer wanted to buy Trinity Mirror. At that time, industry insiders felt that the publisher wasn't prepared, with no real international strategy or commitments outside Germany.

However, Colin Morrison, the chief executive of ACP Media and previously the chief executive of Axel Springer's international group, believes things have changed since then.

"Over the past few years, with management changes and the resolution of shareholding issues, the company is now organised and well-placed to approach the UK market," he says.

Not everybody sees a Hollinger takeover as a logical move for Axel Springer, not least in the fact that its editorial principles, which include a pro-European stance, are in contrast to those of The Telegraph's. Certainly, its strategy to develop and grow unsaturated markets does not appear to be in line with the situation in the well-served UK newspaper and magazine market.

Morrison disagrees, arguing: "There is room to grow in the UK with a platform such as The Telegraph and, once it has made inroads into the English-speaking market, there will be potential for it in the US. The deal has come at the right time for Axel Springer and a successful acquisition could transform its international prospects."

So what's the history of The Telegraph's potential parent? Established just over 50 years ago, the family controlled company owns hundreds of newspapers and magazines throughout Europe. Notably, it publishes Germany's number-one broadsheet title, Die Welt, as well as its influential tabloid Bild. It has also built a dominant magazine business, publishing titles including the women's monthly Bild der Frau, the car title Auto Bild and the television guide Horzu.

Outside Germany, its activities in Western Europe are based chiefly in France, Spain and Switzerland but, more significantly, over the past few years the company has made inroads into the east, in Poland and Russia.

Axel Springer sees these areas, with their emerging economies and programmes of modernisation and reform, as hotbeds of publishing potential. Edda Felf, the head of corporate communications at Axel Springer, believes: "The Eastern European market, with its various unexploited areas, has a high potential for further expansion and growth and provides a really good chance of success."

This has proved to be the case and the launch of a tabloid, Fakt, by Axel Springer's Polish subsidiary last October saw it become the country's best-selling paper within months.

In 2001, it also teamed up with the US title Newsweek to launch a Polish edition of the magazine.

Its weekly circulation has reached 202,116 this year and, as well as establishing Axel Springer in the Polish market, the launch has led Newsweek to develop a further partnership with the publisher in Russia, where it is due to launch later this month.

Rick Smith, the chairman and editor-in-chief of Newsweek Inc, says: "We always look for partners who share our editorial values and have intimate knowledge of local markets and Axel Springer has demonstrated this in Poland. The success and growth of the magazine here is really more than we expected."

Forbes is similarly impressed with Axel Springer's Eastern European credentials and licensed it to launch a Russian edition of its eponymous title on 15 April.

"Of all the potential partners, Axel Springer has the greatest experience and a long-standing commitment to this part of the world. It has a real knack for sizing up markets and then going in and developing them over time," Steve Forbes, the president of Forbes and editor-in-chief of Forbes magazine, says.

Axel Springer is also considering moves further afield and has plans to expand into China and India. Felf stresses these markets are part of long-term ambitions but explains: "We are beginning to establish an infrastructure here so we can get to know the markets in time and prepare for activities here in the future."

Axel Springer is quick to assert that its expansion abroad does not mean it has lost faith in its domestic market, where it still harbours launch plans. Admittedly, conditions for the media industry in Germany are still tough but, steered by chief executive, Mathias Dopfner, Axel Springer has weathered the worst of the recession, coming out of it in good shape.

Its financial performance saw improvement last year with the company's earnings almost doubling and sales edging up too.

However, the home market is not without its difficulties and, later this month, Axel Springer will be the first German publisher to launch a tabloid edition of a broadsheet. Die Welt will launch as Welt Kompakt at the end of May in an attempt to revitalise this now loss-making daily.

From Axel Springer's base in Germany to its outposts in new markets, the publisher is in good shape. If its Hollinger bid is successful it will be well on its way to becoming an international publishing force to be reckoned with. Even if it fails, it seems certain that it will be waiting in the wings for the next big opportunity.

SNAPSHOT: AXEL SPRINGER

Main regions: Germany, France, Switzerland, Spain, Hungary, Poland and

Russia.

Main titles: The German broadsheet Die Welt and tabloid Bild. The

women's monthly Bild der Frau, the sporting title Sport Bild and the car

magazine Auto Bild published on licence throughout Europe. Newsweek in

Poland (Russian title to launch later this year) and Forbes in Russia.

Financials: Earnings (before interest, tax and amortisation) 197 million

euros; sales 2.44 billion euros.

This article was first published on campaignlive.co.uk

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