The new paper will have a circulation of 400,000, one-third larger than Metro, currently the city's only giveaway paper.

The market will soon grow even more crowded: Shih Wing-ching, chairman of property agency Centaline Holdings, plans to launch am730, another free journal, later this year at a cost of up to HK$100 million.

Sing Tao chairman Charles Ho said the new paper will have little impact on the circulation of the group's flagship Sing Tao Daily.

``The new free daily will occupy a different segment of the market from traditional newspapers, and will generate additional income for the group,'' Ho said.

Sing Tao also publishes The Standard and a group of magazines including East Week.

Sing Tao chief executive Lo Wing-hung said the newspaper will be distributed at more than 600 outlets across the city, including business districts, major residential estates, and outside train and underground railway stations. About 300 contract workers will distribute the paper in areas with high pedestrian traffic, Lo said.

Lo said the group is negotiating distribution deals with passenger train operator Kowloon Canton Railway Corp and property management companies.

``Talks with various parties, including KCRC, will be ongoing after the launch as we fine-tune our distribution network,'' he said.

Metro has an exclusive distribution agreement with the Mass Transit Railway Corp under which other free newspaper operators are barred from distributing copies in MTR stations.

``At the moment, we retain full control of where we distribute, and who we distribute to,'' Lo said. ``This means we will have a good understanding of our readership profile, which makes us attractive to advertisers.''

Ho declined to disclose the size of Sing Tao's investment in Headline Daily, though he said he hopes to recoup all the costs of the new project in two to three years.

The first edition of the new tabloid-sized paper will have 24 pages. ``Due to its size, the paper and printing costs will be just a small fraction of a traditional broadsheet newspaper,'' Lo said. ``The newspaper could be increased to up to 40 pages as it attracts more advertisements.''

Lo hopes ads will eventually make up as much as 40 percent of the paper.

Headline Daily will have an editorial staff of 20, and will share some resources with Sing Tao Daily, Lo said.

``In a free newspaper, editorial costs will make up just 10 percent of the total, the remainder being paper, printing and distribution costs,'' Lo said. ``However, in a traditional newspaper, editorial costs typically make up 40 percent.'' mark.lee@singtaonewscorp.com