Newspaper Competition Expected to Heat Up in Turkey

Competition in Turkey’s media industry is bound to get rougher with the pending entry of a new rival, analysts said.

Turkey’s two largest media groups, Dogan Sirketler Grubu Holding AS and Medya Holding AS, will face competition from Rumeli Holding when it unveils its first newspapers next year.

Global Securities downgraded most media stocks it covers in anticipation that company profits will dwindle in circulation price wars. Rumeli Holding, controlled by the Uzan family that has interests in cement and electric companies, will be challenging two well-established media companies that have developed distribution networks and strong advertising revenues.

“The quickest way to get market share is to buy it,” said Radhika Ajmera, a director of Abtrust Fund Manager Ltd.’s $39-million Turkey Trust Ltd., which is quoted on the London Stock Exchange. “It depends on how deep their pockets are.”

The Uzan family is noted for cutting prices to gain market share in their other businesses, and they’re expected to do that with their newspapers. That’s why Tim Talkington of Global Securities has downgraded the Turkish media stocks.

Rumeli Holding is set to enter the market in full force, said Servet Kavasoglu, assistant general manager at Medya Park Yayincilik Sanayi AS, Rumeli’s publishing group. The company has invested an undisclosed amount to set up the business, including buying Rockwell Graphic Systems’ printing presses.

Papers will be published in seven sites outside of Istanbul, eventually expanding to 15. Rumeli aims to pace its three main competitors, which have a daily circulation of about 600,000 each.

“It’s one thing to put money into the machines,” said Nebil Ilseven, the assistant general manager at Medya Holding. “It’s another to get the journalists for the content and do the distribution. I’m anxious to see how they will distribute.”

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Medya and Dogan have agreed to share distribution in remote areas to promote sales, creating a kind of distribution “monopoly,” Ilseven said.

Rumeli’s Medya Park subsidiary plans to employ 600 to 900 people.

“If you give money, everybody will come here,” Kavasoglu said.

Dogan and Medya also have agreed to bar rehiring of staff who transfer to the Rumeli Group and have implemented other methods to keep them out.

Medya has cut the price of its daily Yeni Yuz Yil to 10,000 liras (10 cents) from 50,000 liras as part of its strategy. “There was more interest than generated into circulation,” Ilseven pointed out. By creating a loyal readership base, “you are trying to cut prospective competition that the Uzans will bring,” he said.

Analysts are concerned that heightened competition will hinder an increase in cover prices. This will squeeze profit margins as newspapers import newsprint in foreign currencies and sell newspapers in Turkish lira, which depreciates daily against the dollar.

What concerns Global Security analysts is the Rumeli Group’s previous market entry techniques, which included price slashing when it entered the cement business. This type of technique could carry over into media and consequently force the Dogan and Medya groups to cut prices, thereby limiting profits.

Kavasoglu said that Medya Park had many techniques available to enter the print media sector, which could include promotions and price cutting.

“Reading newspapers is a habit,” he said. “They buy newspapers for promotional gifts. Then they get into a habit.”

Newspaper circulation was boosted about two times by promotional campaigns, according to analyst reports. Those campaigns included giveaways on everything from table linens to cars and were awarded via coupons.

The number of promotions has been restricted by the government, however, and further restrictions are pending. Circulation is expected to decline because of it, analysts said.

“Our long-term outlook is bearish for the media sector,” said Bora Tezguler, an analyst at Strateji Securities Inc. “The only reason they were buying the newspapers was to get the promotions. If or when the law comes into effect, it’ll hurt them.”

“I have doubts about the performance of the media sector for the future,” one observer said. She said, though, that some newspapers, which have high revenue from advertising, would be hurt less by the new competition.