View from City Road: Murdoch can afford to fight on

Look no further for evidence of the unequal nature of the struggle between Rupert Murdoch's News International and Conrad Black's Telegraph group. Figures from News showed that Mr Murdoch's give-away pricing on the Sun and the Times is costing him pounds 45m a year, more than the Telegraph's entire annual profits are likely to be.

But then he can afford it. With earnings at News Corporation, his holding company, running at pounds 577m, 12 times those of his rival, he is clearly in a position to afford to throw money at the circulation war for as long as it takes.

The Telegraph, with much slimmer resources, knows it is in for a tough autumn, but is keeping its fingers crossed that by the spring Mr Murdoch will have thrown in the towel and cover prices will rise again.

There was scant evidence of this on offer, however. News International's decision to guarantee advertisers current circulation levels on the two titles for at least a year from September is a signal that Mr Murdoch intends to go the distance. Higher cover prices would inevitably mean some loss of readers. Admittedly, by raising its advertising rates News has provided some relief to the market as a whole. But whether the Telegraph has the financial stamina to stay in the ring until the last round is debatable.

News's new-found profitability comes at least in part courtesy of the once-reviled satellite station, BSkyB. Merely to mention BSkyB to City bankers is to prompt an outbreak of excessive salivation; its rising profits have encouraged them to dream of the fees that might attach to its pounds 4.5bn flotation. In practice it may prove easier to talk about such fancy valuations than it is to convince investors of them. That was certainly the experience of the cable companies forced to pull market debuts earlier this year.

In any case, such signals as BSkyB is sending out tend to add substance to the view that Mr Murdoch would prefer to bring in additional shareholders - John Malone's cable company Tele- Communications Inc is among those that have reportedly been in talks about a stake. Such horse-trading is more Mr Murdoch's style than the obligations and limitations that would attach to going public.

It would also better suit those shareholders such as Granada that want to cash in their investment, or that want to be able to fix its value in their balance sheets. Last but by no means least, it would enable Mr Murdoch to reduce his stake in the group, ammunition against those who would legislate against his dominance of both airwaves and the printed page, yet without necessarily involving him in any significant loss of control.