Patricia Koza -

Poland's influential daily, Gazeta Wyborcza, has a new face. In the biggest makeover since its founding in 1989 with the birth of democracy in Poland, Gazeta is displaying more colour, the headlines are perkier and many of the long lead-ins to articles have been dropped.

It's dressed to kill.

Its target - if it materializes - is a new quality paper that German media giant Axel Springer plans to launch this spring, maybe as early as April, which is aimed directly at Gazeta. But is Agora, Gazeta's publisher and one of Central Europe's biggest media groups, ready for battle?

Head to head Agora has clashed before with Springer and is taking nothing for granted this time around. In October 2003, it was caught flatfooted with the spectacular success of the Springer tabloid Fakt, which ousted Gazeta as the country's most popular paper within two short weeks.

In an attempt to counter the German invasion, Gazeta last November launched the mid-market daily Nowy Dzien (New Day), to try to stake out a niche between quality dailies and tabloids by offering a mix of politics, health, fashion and celebrity news. It The country's biggest daily gets a makeover pumped €6.2 million into promoting it in the fourth quarter alone. In late February, citing poor sales - which never even approached the breakeven circulation point of 250,000 - Agora suddenly pulled the plug.

Investors lauded the move: Agora's share price, which had sunk from €18.11 to an 11- month low of €13.15 as Nowy Dzien struggled on, rose 4.8%.

Fakt remains the most popular paper in Poland with a national daily circulation of about 516,000, compared with Gazeta's 450,000, although Agora continues to dominate advertising sales. Now the Springer group is gunning directly for Gazeta's more elite audience.

FACELIFT

Agora has already announced it will boost its promotion budget, which in 2005 was about €41 million, to protect its crown jewel. “Gazeta Wyborcza is the leader in the quality newspaper segment - our job is to ensure Gazeta keeps this position if and when the Polish version of Die Welt appears on the market,” says Agora's chief executive, Wanda Rapaczynski.

Gazeta's sudden facelift is part of these tactics. The new version, though, looks suspiciously like a mock-up of the new Springer paper, according to industry insiders who saw the latter in February. “There's a very strong likeness,” said Renata Gluza, vice editor-inchief of Press, a Polish monthly covering the sector. “The colours are about the same as the daily of Axel Springer.”

Gazeta, the full name of which means Election Gazette, started life as a print outlet for the first democratic parliamentary elections in 1989. Its first headquarters was an empty nursery school where writers hunched over their computers at child-sized tables and chairs. On warm days, editorial meetings were held outside in the sandbox.

Within a couple of years its editors, who had honed their talents publishing and distributing illegal underground journals during the martial law period, realized that growth needed Western expertise and investment.

They recruited Rapacyznski, a Polish exile, from a high-profile job at New York's Citibank and turned to Cox Enterprises, the Atlanta-based newspaper and radio group, which acquired a 12.5% stake and worked closely with its management team on development, diversification and Western standards of corporate governance. Agora's shares are traded on the New York Stock Exchange.

Besides its cash-rich flagship, which boasts 19 regional offices, Agora holds 16 general interest magazines, 28 radio stations, the leading outdoor advertising company, the free press title Metro distributed in 19 cities, and gazeta.pl, Poland's third-largest Internet portal. Its market cap stands at $1 billion.

Further attempts to expand, though, have floundered, with Agora missing some opportunities beyond its borders, first in Central Europe and then in neighbouring Ukraine, where the press market is now flourishing with a 30% annual growth rate.

In one of its most disastrous forays, Agora sought to acquire a national television station in 2002, but a media law prevented such cross-ownership. An apparent attempt by Polish film producer Lew Rywin, allegedly acting on behalf of the socialist government of Prime Minister Leszek Miller, to solicit a €14.5 million bribe from Agora to drop the restriction led to the biggest corruption scandal in Polish history, tarnishing not only the government's image but that of Agora, which waited six months to publish details of the attempt.

A WILDCARD

Agora remains a cash cow, posting net income of net income of €32.5 million on sales of €310.5 million, despite the drain of the disastrous Nowy Dzien. But prospects this year aren't as promising.

Sales dropped 5% in the fourth quarter, partly due to cannibalisation of Gazeta revenues by its doomed sister publication. The company also experienced growth of only 4% in the ad market for the press sector, versus expectations of 10%.

There is one wild card in the press market battle. The majority owners of the daily Rzeczpospolita, Norway's Orkla Media, have put up for sale Poland's second-largest quality daily and its other Polish properties, and both Agora and its archrival Springer are seeking to acquire the paper. If Springer were to acquire Rzeczpospolita, it would likely cancel its plans for a new daily. But the remaining 49% is held by the Polish state, and the current centre-right government is unlikely to countenance as majority owner either a foreign entity or a Polish one whose flagship happens to be its greatest critic.

The demise of Nowy Dzien, at least, cleared the field of some other potential rivals. Polish magnate Michal Solowow announced he has abandoned plans to pump €25.7 million into launching a new nationwide daily to compete against Gazeta, as well as earlier plans to upgrade Warsaw area daily Zycie Warszawy.

Meanwhile, it looks like Agora will keep on doing what it does well - making money - but will unlikely find new ventures in which to park it. “It's not a sin not to expand,” said analyst Michal Mierzwa of Erste Securities Polska. “Maybe there is a 'no growth' story in this company but it generates huge amounts of cash. To be honest, they should stay with what they have.”