LONDON, May 2 /PRNewswire/ -- Duff & Phelps Credit Rating Co. ('DCR') has
today reaffirmed the 'BBB-' (Triple-B-Minus) local currency and 'BB-' (Double-
B-Minus) foreign currency ratings for Hurriyet Gazetecilik ve Matbaacilik AS
('Hurriyet').
Hurriyet benefits from its established position as Turkey's leading
national newspaper and its particularly strong franchise in newspaper
advertising. This market position is underpinned by the relative stability of
its circulation and its readership profile, which is concentrated among the
middle and upper income ranges. Hurriyet's strategy is to boost returns
through maximizing its revenues from advertising. The business' total
revenues are vulnerable to cover price wars, although in Turkey these have
generally been offset by circulation increases. Additionally, as with all
newspaper companies, Hurriyet is vulnerable to the volatility of newsprint
prices.
The Turkish newspaper market continues to be characterized by low
penetration rates, with significant potential for existing operators to
increase circulation over the long term. Additionally, DCR believes that
advertising revenue growth in Turkey is likely to exceed the overall rate of
growth in the economy. Structural reforms, including privatization, as well
as increased competition in industries such as telecommunications are expected
to drive the growth of advertising revenues. Whilst competitive cover price
reductions tend to generate some increase in circulation numbers, newspaper
operators profits are vulnerable in the short to medium term. DCR expects the
competing Milliyet and Sabah titles to maintain aggressive cover pricing
polices to boost market share and circulation. In the near term, newspaper
profitability is also likely to be squeezed by recent increases in newsprint
prices.
Hurriyet's strong operational and financial profile make it a key
component of both the Dogan Media Group and Dogan Holdings groups. Hurriyet
benefits from group synergies such as the Dogan Media Group's ownership of
Turkey's largest print distribution network and its ability to bulk purchase
publishing materials, including newsprint. DCR takes comfort from Hurriyet
being listed on the Istanbul Stock Exchange, both in terms of its corporate
governance, as part of a family controlled group, and access to capital.
Overall, the business has a strong financial structure and has
historically generated significant profit and operating cash flow. Whilst DCR
expects to see a decline in cover price revenues in 2000, we also expect to
see significant increases in advertising revenues. Resulting from a
combination of increases in newsprint prices and of operating efficiencies,
the business should achieve some growth in EBITDA in 2000. Future growth in
revenues and EBITDA will be driven by increases in circulation and advertising
revenues. A less inflationary environment is expected to result in Hurriyet
having less scope to generate returns from financial investments.
For additional research on Hurriyet, visit DCR's Web site at
http://www.dcrco.com (Quick Search: Hurriyet). DCR's research is also
available on Bloomberg at DCR and First Call's BondCall Direct/Research
Direct at http://www.firstcall.com, as well as through other third-party
providers.
SOURCE Duff & Phelps Credit Rating Co.
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CONTACT:
Raymond Hill, +44-0-20-7417-7948,
hillr@dcrco.com, or Kaan Kiziroglu, +90-0-212-230-1891,
ibardcr@superonline.com, both of Duff & Phelps Credit Rating Co.
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