VISCOUNT ROTHERMERE, the chairman of UK-based Associated Newspapers, has parked his tanks on Sir Tony O’Reilly’s carefully manicured lawns, firing the first shot in what could prove to be a bloody and expensive newspaper battle.

The phoney war surrounding the planned launch of Metro, Associated’s daily freesheet, is expected to come to an end this week when the product is finally unleashed on the citizens of Dublin, adding another title to a stable that amounts to the loss-making Ireland on Sunday and Buy & Sell, a classified tabloid.

O’Reilly’s Independent News & Media (INM) is not taking this threat lightly. Despite its growing presence in Australasia and South Africa, Ireland’s dominant newspaper publisher is fiercely protective of its home patch and has made it clear it will not shrink from Associated’s challenge.

With INM’s commander-in-chief otherwise detained, it was Sir Tony’s lieutenant, son Gavin, who engaged in jaw-jaw as he spoke to the media troops following the publication of the group’s latest results.

Standing in the plush surroundings of the Merrion Hotel, he described as “slightly delusional” the notion that the challenge from Associated would not be met. Warming to his theme, Gavin noted that “some groups stupidly wish to launch against us. Independent knows its market and will do whatever is required to further enhance our brands, our performance and our operating margins. We’re ready for this.”

He didn’t spare Associated Newspapers or its parent, Daily Mail and General Trust. “All [DMGT] has to show from Ireland on Sunday is falling circulations, increased losses and an investment of about €52m,” he said. “I think it’s fair to say that it’s dumbing down [IoS] at this point. How do you achieve efficiencies by taking a one-day operation and making it a seven-day operation — it defies business logic.”

If the main event proves as nasty as the warm-up, investors are advised to hold on to their hard hats.

GAVIN O’REILLY described the speculation as “wonderful pub chat and exciting to those working in the local media”, but tried to play down its impact by calling it a local skirmish that is insignificant in terms of INM’s overall business.

It is for now, but that might not remain the case. Last week’s interim results showed Ireland accounts for 25.8% of INM’s total revenues, but a healthier 31.7% of the group’s €141m operating profits.

Metro is popular with readers but shy on financial details in London and other UK cities. It is targeted at the Evening Herald, the most fragile product in the INM stable. Primarily distributed in the greater Dublin area, the Herald has had a mini renaissance of late with sales rising by 1% to 93,830 in the first six months of the year. It is estimated to contribute about €5m to INM’s group profits, but is perceived as its weakest link.

INM is planning to fight back with its own free offering, but the significance of this skirmish goes beyond the Metro and the Herald. Even though Associated has shipped losses of €52m at IoS over four years, it is at an advanced stage of planning an Irish edition of the Daily Mail for launch early next year. Should that come to pass it would represent the most serious challenge yet to the Irish Independent’s dominance in the middle market.

O’Reilly will be hoping that Associated’s experience with IoS is evidence that the company has yet to figure out the local market. While initially sales of the paper trebled, it came at a huge cost as Associated used free CDs, books and DVDs to buy sales. Average circulation in the six months to June was 139,170, down from 151,899 a year earlier.

Readership too is under pressure. Latest JNRS readership statistics show a decline of 2.5% in the numbers reading the paper during the 12 months to the end of June.

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