Battle of the press barons hits shares

THE newspaper industry looked into the abyss last night as Rupert Murdoch's News International slashed the weekday price of the Times to 20p.

The move was its swift reply to the Daily Telegraph's decision on Wednesday to cut its cover price from 48p to 30p, and signalled the outbreak of a vicious circulation war in the broadsheet market.

The editor of the Times, Peter Stothard, said the new price (with 30p for the Saturday) was permanent and part of the group's long- term strategy of raising sales towards the one million copies a day mark from the current 517,000.

It was decided by Mr Murdoch, who has vowed to take the paper into the lucrative market traditionally dominated by the Daily Telegraph. Mr Stothard is determined to hold on to the 150,000 extra buyers who are now purchasing the cut-price Times.

The new price destroys the traditional price differences between mass-market tabloid and broadsheet newspapers and means the Times costs the same as the Sun.

The Telegraph group had earlier claimed success with a price cut which, it claimed, had boosted circulation by more than 100,000 copies to more than 1.1 million.

But its decision to go head-to- head with News International caused a bloodbath on the Stock Exchange and an inquiry into share dealings in the Telegraph. Share prices fell sharply while the City fretted about damage to profits as the groups battled for market share.

Worst hit was the Telegraph: more than pounds 264m was wiped off its market capitalisation as the share price tumbled from 540p to 349p. But the Daily Mail group dropped 178p to pounds 12.75 and Mirror Group fell 31p to 134p.

The Stock Exchange investigation into the dealings in the Telegraph was triggered by the share price fall. Investors were also incensed because on 19 May, Hollinger, the Canadian holding company controlled by Conrad Black, the Telegraph's chairman, sold 12.5m shares in the group at 587p a share, raising pounds 73m.

Investors who had bought the shares and now faced huge losses on them were privately furious, given the proximity of the sale to the cover price decision.

But Mr Black insisted yesterday that at the time of the sale he had had no inkling that the cover price would be cut. 'I'd have to be both completely stupid and totally dishonest to do that,' he said.

And he warned: 'If anyone working for the Stock Exchange or in any other walk of life states that there was anything unethical in it, I'll see them in court.'

It would have been quite unacceptable to have forgone taking the right decision for the Telegraph just because it would open Hollinger to criticism, he said.

Mr Black had earlier made it clear he was unsure whether the Telegraph would follow the Times if it were to cut its cover price still further - something he said would be an attack of 'aberrant and self-destructive tendencies'.

News International is estimated to be losing more than pounds 45m from its price cutting at the Times and its stablemate the Sun. Lost profits at the Times are thought to be about pounds 17m.

The additional cut in the Times' cover price will cost it an estimated extra pounds 12m a year of losses if it maintains its payments to retailers and wholesalers, who currently receive about 17p a copy. Printing costs are about 13p a copy.

The Telegraph faces losing about pounds 40m in revenues as a result of its share price cut. But Mr Black insisted that this would not necessarily damage its profits since he expected a compensatory rise in the Telegraph's circulation and advertising revenue. There were also suggestions from inside the Telegraph last night that a round of severe spending cuts was being planned.

Other newspaper groups threatened by the price war were reserved in their comments, as they considered their options. Peter Preston, editor of the Guardian, said: 'I am watching with the bemusement that I sometimes reserve for a bad pantomine. These are just games being played with large sums of money.'

The only broadsheet paper likely to be completely unaffected is the Financial Times, priced at 65p and selling to a distinctive business market. The Independent's price cut yesterday, when it sold for 20p for one day only, was judged by its marketing department to have added about 68,000 copies, taking sales to 331,000.

Industry in frenzy, page 3

Letters, page 17

Market report, page 32

View from City Road, page 33