Rivals try to push Maiden off the rails

Maiden faces a barrage of reviews of its crucial stations and trains contracts, but with its long history in rail transport, do rivals stand a chance? By Lucy Barrett

Maiden Outdoor has long been the subject of industry scrutiny: as the only outdoor company to be floated on the London Stock Exchange, it is forced to be more transparent in its business dealings than rivals.

Current attention centres on its two contracts with Network Rail – formerly Railtrack – as well as its contracts with train operating companies. All are extremely lucrative and important to Maiden’s revenue streams. Its station advertising and train operating contracts, for instance, account for a quarter of its total ad site sales.

Network Rail put its station advertising business out to tender at the end of last year (MW December 18, 2003) and is expected to do the same with its roadside billboard business in the next few weeks.

Maiden has sold advertising space on the UK’s railways since it acquired British Transport Advertising in 1996, and stands to lose a lot from this process. It is the sole contractor of Network Rail’s stations and has about half of the company’s roadside sites (the rest are split between Clear Channel and JC Decaux). All outdoor contractors, Maiden included, will be putting in every effort to win the Network Rail business.

The tenders have come at a bad time for Maiden. At the end of last year, the outdoor contractor, which had 24 contracts with 12 train operating companies, lost its contract with GNER to Viacom – the US media giant that operates London Transport’s advertising – without a formal bid.

“The contract had come to an end,” says Maiden managing director David Pugh. “GNER said it didn’t want to renew the contract for the time being and then it suddenly announced it was giving the business to Viacom.”

Insiders claim Viacom is also determined to snatch Network Rail’s station ad account from Maiden. When Viacom was given the GNER business it issued a statement claiming the business was worth &£5m (MW December 4, 2003), a figure disputed by Maiden. But one analyst felt strongly enough about the GNER contract to call it “a major loss” for Maiden, and the company’s shares fell by 12 pence at the start of last week.

“It’s ridiculous,” says Pugh. “[Viacom] was calculating how much that business was worth over seven years. The analyst took it to mean we had lost &£5m off our annual revenue.”

Maiden recently managed to hold on to First Great Western – which operates three contracts – and last week was reappointed by South East Trains. It is now awaiting the result of tenders on 13 contracts and is continuing to manage the advertising for a further eight contracts, which are due to be put up for tender this year. Viacom is expected to be bidding for the majority of these contracts.

“Make no mistake, Viacom has been waiting for these opportunities for a long time,” says one outdoor buyer. “But Maiden’s relationship with these companies’ procurement departments goes back to the days of British Rail. There is a lot of history there.”

But Viacom is not the only thorn in Maiden’s side. French-owned outdoor company JC Decaux also wants a slice of the Network Rail pie, and has a secret weapon.

Two weeks ago, Network Rail commercial advertising manager Yan Huybrechts jumped over the fence to join Decaux (MW last week). His role as director of special projects is aimed at increasing Decaux’s business outside its existing categories of billboards, street furniture and airport advertising. Most notably, he will be working on the bid for the Network Rail business.

Rival contractors are outraged. They claim Huybrechts has had “unlimited” access to Network Rail’s existing contracts, and that this knowledge gives Decaux the upper hand in the race to win them. These claims were dismissed by Decaux chief executive Jeremy Male, who believes there is nothing of great interest in a senior outdoor executive jumping from one company to another.

Some insiders are not so sure Decaux’s move is as shrewd as it first seems. They claim that Network Rail’s procurement department may frown on Huybrechts’ appointment and, in reaction, make a decision against Decaux. A number of outdoor companies also claim that Huybrechts had already knocked on their door for a job, and been turned down.

Clear Channel has not publicly declared its interest in the Network Rail business, but as the other major UK player it is expected to bid for that bit of Network’s roadside business it does not currently control.

Maiden management and industry experts are not ruling out Maiden’s chances of success and point to the 50 per cent of Network Rail’s roadside business currently handled by Clear Channel and Decaux that it could pick up. Maiden chief executive Ron Zeghibe says: “Everyone’s focus is on what we could lose. But we see this as an opportunity to win the rest of the business we don’t have.”

Many outdoor buyers say they would be happier if Maiden maintained control of Network Rail’s business. As one says: “If Maiden’s share of outdoor was significantly weakened, it would mean another company becomes over-dominant, and that is never good news for advertisers.”

Until the exact nature of the contract for the station advertising business becomes apparent in the next two weeks, outdoor companies do not know if it is worth their while bidding. Nor is it clear what sort of operation Network Rail will be in the future. At the beginning of this week, transport secretary Alistair Darling announced an overhaul of the railway network. The move means that the shape of Network Rail has yet to be determined and the organisation may opt to continue with its existing contracts for the foreseeable future.

If that is the case, all the efforts being made by the outdoor contractors may, for the time being at least, be in vain.