Hong Kong's free-newspaper market may be headed for a shake-up as Metro Daily's exclusive contract to distribute within the MTR system will expire next year, industry sources said. Media Eye learned that MTR Corp will invite tenders as early as April for a new newspaper distribution contract to start next year. The results could be announced in the third quarter. Industry watchers said it is normal for MTR to invite tenders a year before existing contracts end. Metro Daily's contract expires in April next year. MTR could not be reached for comment. Metro Daily, published by Metro International of Sweden, secured the ground-breaking free-newspaper distribution contract within MTR's urban lines in May 2002 as a new customer service introduced by former MTR chairman Jack So Chak-kwong. The newspaper turned profitable shortly after it was launched. Profits amounted to tens of million dollars in the first three years, before newcomers tapped the market in 2005. Metro Daily now has a daily circulation of about 340,000 copies, with average daily readership of 561,000. Its dominance among free newspapers was broken after Sing Tao News Corp's Headline Daily and property agency Centaline Group's am730 hit the streets in the summer of 2005. Without an MTR deal, these titles were distributed outside MTR exits and in residential estates. They also distribute inside the former KCR lines - the East Rail, West Rail and Ma On Shan lines Headline Daily, leveraging on its parent's resources, has boosted its circulation to 700,000 copies from 500,000 copies when it was launched. It has more than 1 million readers and is ranked as the city's third-most widely read paper. Meanwhile, am730 rose to fourth position, with an average of 608,000 readers. Sources said Metro Daily needs to share a certain proportion of revenue with MTR for the exclusivity rights. However, the popularity of am730 and Headline Daily proves that exclusive distribution within the MTR is not the only success factor. 'We do have plans to distribute outside the MTR system if the payment to MTR is too high,' a source close to Metro Daily told Media Eye, adding that the cost of distributing the newspaper would be less than payments to MTR. The group's annual results showed the Hong Kong edition of Metro Daily was still profitable despite the softening economy. Revenue in Hong Kong dollars was down 12 per cent year on year in the fourth quarter but increased 3 per cent for the full year. Parent seeking fresh funds Meanwhile, things are not so rosy at its parent, Metro International, which failed to break even, leading to a rights issue to raise up to 550 million Swedish kronor (HK$529 million) for daily operations. Net sales last year decreased 11 per cent year on year to Euro295.5 million (HK$2.96 billion). The company made an operating loss of Euro20 million. 'The group does not have sufficient working capital for the next 12 months, and funds are needed in order to repay outstanding bank loans in its entirety, to continue operations, execute Metro International's strategy and implement cost saving measures to increase shareholder value,' Metro said in the results announcement last week.