UPDATE 1-Canwest's flagship Post reduces print presence

Mon Nov 3, 2008 7:13pm GMT

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By Wojtek Dabrowski

TORONTO Nov 3 (Reuters) - The National Post, the flagship daily newspaper of Canwest Global Communications CGS.TO, is significantly cutting back its presence in two Western Canadian provinces, a spokesman said on Monday.

The money-losing Post is suspending home delivery in the province of Manitoba -- Canwest's home market -- and will only provide Saturday newspapers for retail purchase in Manitoba and neighboring Saskatchewan.

The paper's operations elsewhere in Canada are not affected.

"The cold, hard reality right now is that the cost of the newspaper is not great enough to cover the printing and distribution cost in these smaller markets," Canwest spokesman John Douglas said, adding: "The two markets put together are not very large in terms of what the circulation was."

The Post will sell discounted digital subscriptions instead and has also struck a content-sharing deal with the Winnipeg Free Press. Under that agreement, the Free Press has started to print some Post columns and business news.

The moves come as Canwest, Canada's biggest media company, tries to cope with significant headwinds because of the global economic slowdown.

Last year, Canwest expanded its television holdings by partnering with an affiliate of U.S. investment bank Goldman Sachs (GS.N) to buy specialty TV group Alliance Atlantis Communications for C$2.3 billion.

Canwest owns Canada's Global network of TV stations and has Australian TV operations through Network Ten.

The company's media asset base is reliant on advertising revenue. However, because of the weak economy, many companies are expected to trim their ad budgets, which in turn doesn't bode well for firms like Canwest.

That is in part why the Winnipeg, Manitoba-based company has seen its shares slide into penny stock territory. On Monday, the shares were flat at 92 Canadian cents on the Toronto Stock Exchange.

In early August, Canwest's stock jumped well over C$2 after a media report that suggested the company may be planning to go private, but no deal has materialized.

Canwest is carrying about C$3.7 billion ($3.1 billion) in debt on its books, which has raised some investors' eyebrows.

While media companies in the United States have begun undergoing painful job cuts and restructurings, widespread cost cutting has yet to take place in Canada, where drops in ad revenues and readership numbers have not been so severe.

Analysts and critics have long speculated that the Post could be shuttered because of the estimated tens of millions of dollars in losses it has generated since its launch 10 years ago.

Asked whether Canwest has made any firm decisions about the Toronto-based newspaper's future, Douglas replied: "the National Post has been on a road to profitability. It continues to make headway on that."

However, he also confirmed the daily continues to lose money.

($1=$1.19 Canadian) (Reporting by Wojtek Dabrowski; editing by Richard Valdmanis)

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