Mecom CEO: disposals over, but more cuts

LONDON (Reuters) - European newspaper publisher Mecom (MEC.L) has finished a program of disposals needed to pay down debt and will continue cutting costs next year as advertising will not bounce back to previous levels.

Chief Executive David Montgomery, a former CEO of Britain's Mirror Group, said he would devote 2010 to accelerating the company's online growth and would like eventually to get back into Germany, where Mecom sold its operations this year.

"Definitely," he told the Reuters Global Media Summit when asked whether he would like to return. He said the selling off of assets was "completely finished."

"The German market is essentially strong regional franchises and I actually think that's a huge benefit for what we're approaching now in the online area, because local content is likely to be king."

Mecom, which owns about 300 print titles and 200 websites in the Netherlands, Norway, Denmark and Poland, is betting that local news and information will prove resilient, sucking readers of global news away from print to the Internet.

"Frankly, no one's going to pay for bombs in Iraq. It's not what turns people on. What turns them on is what's happened in the next street, and no one else can provide that for them," he told the London leg of the summit.

Montgomery has driven costs out of the businesses he has acquired and consolidated since founding Mecom in 2000, partly by aggressively fusing online and print operations, a strategy he has championed.

But on Monday he said this approach -- since followed by many news organizations -- did not always work, and said he would experiment at two of the company's Norwegian offices with separating print and online operations from January.

"We were completely dedicated to total integration. But the reality is people pay lip service to integration but they don't really do it," he said, adding that he might try a similar approach in the Netherlands if Norway went well.

Montgomery said he expected less than half of the advertising revenues lost by Europe's newspaper industry during the recession to return over the next three years, and said he would keep cutting costs.

"I think the European market of newspapers is estimating maybe at 50 percent of advertising that they lost in the recession. I actually don't share that view. We're budgeting for something less than that," he said.

Earlier this month, the company said it had accelerated cost-cuts to allow it to meet expectations of a roughly 30 percent drop in core profit this year.

Mecom had net debt of 425 million euros ($639 million) as of end-October, about 3.7 times expected 2009 EBITDA, according to analysts, and is currently well within its loan covenant terms.

Montgomery said 2010 would be devoted to accelerating the growth of online, and said Mecom would likely have many more websites in a year's time, and a similar number of print titles to what it has now.

(Editing by Steve Orlofsky)