Axel Springer did not complete due diligence on the Telegraph before sealing its £575m takeover, with sources saying the German media company could struggle to recoup its eye-watering investment as the titles shift toward less-profitable digital subscribers.
To wrap up the deal quickly, Mathias Döpfner, the chief executive of Axel Springer, decided to forgo the usual extensive due diligence process to vet the value and prospects of a company, according to multiple sources.
Axel Springer last month swooped to buy the Telegraph titles from UAE-backed RedBird IMI, thwarting a £500m deal agreed with Lord Rothermere, the owner of the Daily Mail by paying a substantial premium.
RedBird IMI, which was forced to put the titles up for sale after the British government passed a law limiting foreign states or associated individuals from owning newspaper assets in the UK, called the negotiations “swift and efficient”.
The dogged pursuit by RedBird IMI to recoup its full £500m investment, which led to three years of uncertainty and a merry-go-round of potential buyers, effectively set a reserve price for bidders despite most analysts’ estimating a value of about £350m given the mounting challenges facing publishers.
“There are big questions,” said one industry source. “There is a reason why, throughout this whole saga, private equity, analysts and others kept coming to a figure around £350m from day one. Those numbers were all derived from the same source, a forensic examination of the subscriber numbers, especially as the print operations continue to decline.”
The Telegraph still relies heavily on its print newspaper business, with print sales, subscriptions and advertising accounting for 61% of the £255.3m total revenues the media group made from its overall news publishing operations in 2024, the most recent figures publicly available.
However, all three revenue streams remain in decline – by 3%, 5% and 13% between 2023 and 2024 respectively – amid a push by the Telegraph to transition from an “advertising-led print strategy to a subscriptions-led digital strategy”, according to its annual financial report.
The most recent topline figures show that total subscriber numbers rose 5% to 1.086 million in 2024, of which 78% were digital, with digital subs revenue up 18% to £81m.
However, in recent years the Telegraph has become increasingly opaque, having stopped publicly reporting audited, detailed breakdowns of subscribers and their revenue value at the end of 2023.
Under Nick Hugh, then TMG chief executive, it acquired the specialist magazine business Chelsea Media Company (CMC) in 2023, allowing the group to hit its target of reaching 1 million paying subscribers that year by adding titles such as Classic Boat, Sailing Today and Independent School Parent.
While CMC sharply increased print and digital subscription numbers, the subscribers are far less valuable to the group than those for the Telegraph newspaper and website.
According to the group’s last published breakdown of subscribers, the average net value of one CMC subscriber – and those signing up for wine and puzzle products – was just £24.87 annually, from 230,112 sign-ups at the end of 2023.
This compared with a value of £106.22 for a digital news subscriber and £541.27 for a hugely profitable, albeit rapidly disappearing, print news subscriber.
The Telegraph also reported that about 197,000 news subscribers were on free trials or “bonus” subscriptions.
The figures mean that 41% of the 1,035,710 total subscription base at that time were on very low, or free, rates.
Anna Jones, chief executive of the parent Telegraph Media Group (TMG), said in November that the expectation was digital subscriber growth of 19% for 2025, which would take the total digital base alone to just over 1m.
However, research from January this year shows that the Telegraph is pursuing digital subscribers with heavily discounted offers of up to 89% on the full-year price of £269, the joint highest rate alongside Mail+, according to a Press Gazette analysis of the strategies of about two dozen publishers.
The full-price annual digital rate has been frozen this year, while the cost of a monthly subscription has fallen by £10 over the last two years, against a backdrop of the pressure of the ongoing rapid decline in the cash-cow print subscriber base.
An analysis of company annual reports shows a decline of a fifth in the number of high-paying print subscribers between 2022 and 2023, after a 16% fall between 2021 and 2022, and 10% between 2020 and 2021.
Print advertising revenues have dwindled to just £29m, while digital advertising revenues, under increasing pressure in the AI era, stood at £20m in 2024.
However, Döpfner, who has wanted a crown jewel British media asset since missing out on buying the Telegraph in 2004 and the Financial Times in 2015, has the outlook of a long-term proprietor, having taken Axel Springer private two years ago.
He has splashed about $1.4bn (£1.0bn) on digital assets, including Politico and Business Insider, the latter of which has recorded steep subscriber losses and staff cuts in recent years, as he focuses on a long-term “digital first, digital-only” strategy.
And for all the turmoil and uncertainty faced by the Telegraph it has maintained a resilient financial performance.
Adjusted profits held steady at £60.7m in 2024 while total revenues increased by 1.2% to £279m, down from growth of 5.4% in the previous year as instability owing to the ownership uncertainty took its toll.
“The price reflects scarcity value,” said Abi Watson, an analyst at Enders Analysis. “It’s above what the underlying economics of a still print-heavy business would traditionally support, but he’s been after it for two decades, his rationale is different to most owners, and it is a done deal.”
A spokesperson for the Telegraph said: “Our focus is on the long-term growth of the business and building lasting relationships with our readers through our award-winning journalism. The Telegraph’s digital subscription revenue grew by 18% to £81.1m in 2024.”
RedBird IMI and Axel Springer declined to comment.