TfL puts £10m price on rights for new Underground newspaper

Transport for London is seeking £10m a year for the right to distribute a new free afternoon newspaper on the capital's Tube.

TfL, which is chaired by London Mayor Ken Livingstone, is drawing up tender documents. It is waiting for the Office of Fair Trading to give the go-ahead for the afternoon newspaper, which could come as early as next month and will trigger an auction for the contract.

The industry is keen to launch a rival to Associated Newspaper's London Evening Standard, but some insiders are concerned that potential bidders will balk at paying so much. Mark Gallagher, press director at media buying agency Manning Gottlieb OMD, said: "A sum of £10m would be outrageous. I do not believe a free evening paper that is profitable exists."

Associated, Express Newspapers, Guardian Newspapers and News International, publisher of The Times, have all lodged expressions of interest. The new newspaper could be on the stands before Christmas.

Associated, which has an exclusive contract to distribute Metro on the London Underground and on railway stations, had tried to block the deal. But earlier this year, following an OFT investigation, it agreed to give up the exclusive rights for distribution during the afternoon or evening.

Associated pays around £2.6m a year to LU for the distribution rights for Metro and provides another £2m of free advertising in the newspaper for the Tube.

Analysts say that Associated, which is owned by Daily Mail & General Trust, underpaid for the rights in 1998 for what was then the UK's first mass-market free newspaper. They estimate that it makes a profit of around £5m per year.

The OFT has permitted Associated to bid for the new distribution contract while retaining its morning rights. It has an advantage over rivals because newspapers distributed on the Tube have to be stapled to prevent pages separating, which would pose a fire hazard, and Associated already has the printing technology in place. Less flammable, water-based ink also has to be used.