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The competition to control and maintain New York's 2,800 bus stop shelters, once considered the ugly stepchildren of outdoor advertising, is turning into a heated battle.

The current contract, owned by Manhattan-based Gannett Outdoor Group since 1987, expires next May. And two businesses from France and Germany are salivating at the chance to take a bite out of the robust New York market-and gain a foothold in the U.S.

Paris-based JCDecaux and Wall City Designs (the U.S. affiliate of Wall Verkehrsanlagen, Berlin) are best known in the States for their European armada of automatic pay toilets. However, both also operate transit shelter franchises throughout Europe and are hoping to leverage their experience to gain the city's shelter franchise and then the contract for automatic pay toilets.

"From our point of view, the pay toilet issues have nothing to do with the bus shelter contract," said Stanley Shor, executive director of the Department of Transportation's Franchises, Concessions & Consents Division. "However, the firms may see things differently."

Bus shelters are one of the fastest growing areas of advertising, at $140 million in 1993, up 55% from 1990.

The Department of Transportation will choose the business that offers the most competitive bid. But Councilman Walter McCaffrey said that "with all things equal," preference will be given to domestic companies.

By all accounts, Gannett will be hard to beat at least for the bus shelter contract.

The Gannett group, a division of $3 billion media giant Gannett Co., operates nearly 75% of the estimated 14,000 bus stop shelters throughout the country. Its presence in major markets, including Los Angeles, Chicago and San Francisco, allows Gannett to offer advertisers national packages. Gannett's national infrastructure also allows it to provide a level of maintenance that smaller competitors will find hard to beat.

The city is expected to prohibit tobacco and alcoholic beverage advertising in the next contract. It's also sure to seek a much bigger share of the franchisee's revenue. The current pact mandates 22% of Gannett's ad sales be paid to the city. Insiders say New York will seek to double that. This year, the city made $5 million on its share of Gannett's ad revenue.

But some suggest European rivals won't be scared off by less than luxurious profits. While both companies say they intend to make money off the bus shelter contract, several industry observers say they might be hungry enough to view New York City as a loss leader.

"Let's face it: If either of these companies can capture New York, they can go almost anywhere else in the country," one insider said.

Ms. Gault is a reporter for Crain's New York Business.

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