The timing of Independent Newspapers plc's £106 million rights issue is certain to add fuel to the burning issue of who will get what in the imminent shake-up of Australia's media industry.

Tony O'Reilly's remarks at the recent Independent annual meeting regarding his acquisitive intentions will do little to dampen speculation that he will be a key protagonist in the long-anticipated bunfight.

The rumour mill has been working overtime in Australian media circles since the right-wing coalition took power in March. The government is dominated by Prime Minister John Howard's Liberal Party, which before the election promised a thorough review of an archaic regulatory system widely considered to be well past its sell-by date.

The current rules are designed not only to restrict the presence of foreign moguls in the Australian market but also to limit the concentration of media in local hands. Specifically, the rule aims to separate ownership of broadcast and print media.

As former premier Paul Keating put it: "You can be a prince of print or a queen of the screen but not both."

Laudable in theory, in practice the present rules are a complex vortex which have pleased few of the people most of the time.

In spite of the stringent rules, the main players in this relatively small market of 18 million consumers have managed to gain footholds in all aspects of the media.

Australia's media landscape can be viewed as a battlefield with two large armies represented by Rupert Murdoch and the country's richest individual, Kerry Packer, playing a long war of attrition for the available riches - the major prize being the John Fairfax newspaper group.

Any change would throw TV, radio and print media ownership into the melting pot, but Fairfax remains the focus.

This vast continent has the range of media expected in a modern society but its ownership is characterised by intense rivalry between the Murdoch and Packer families, a conflict which has now entered its third generation.

Tony O'Reilly's Australian Provincial Newspapers (APN) runs a profitable sideshow with interests in regional titles and an increasingly strong presence in radio.

All the players, including Canadian Conrad Black, are constrained by one set of rules or another from anything other than incremental bolt-ons to their existing operations. All of them are of course vying for the available synergies by adding further media operations to their respective empires.

The current cross-media rules restrict concentration in a number of ways but the defining criterion is the nebulous definition of what constitutes control rather than ownership as such.

Under the 1992 Broadcasting Services Act, control is defined as being in a position to influence or determine the affairs of a company. For example, Kerry Packer cannot take a controlling stake in Fairfax because he owns the most popular TV stations in the country, the Channel Nine network. He also controls and owns the most extensive stable of magazines in Australia.

Fairfax, publisher of the Sydney Morning Herald, the Melbourne Age and the nation's flagship business newspaper, the Australian Financial Review, is nominally controlled by Conrad Black's Hollinger Group.

The Canadian, who also runs the Telegraph in London, has been unable to convince the government of his case for increasing the foreign ownership ceiling above its 25 per cent. This has left him highly vulnerable to domestic predators, constrained solely by cross-media ownership rules which the new government looks certain to modify or scrap altogether.

Similarly constrained, Rupert Murdoch, a US citizen, is stymied by the rules governing foreign ownership of media. Tony O'Reilly has managed to avoid these regulations because his operations are channelled through a family trust and his children are Australian citizens.

Dr O'Reilly's problem, as evidenced during his tilt at Fairfax in 1990, was a lack of cash to buy the group outright rather than as part of a consortium.

Even this week's rights issue would not change this for Dr O'Reilly but it could put him in a position to cash in on any changes wrought in the promised war between Murdoch and Packer when the current regulations are overhauled.

Although the change of government has intensified the speculation over the future of Fairfax, the war for control of the titles has continued for almost a decade since the previously highly profitable group went into receivership under Warwick Fairfax. The battle won by Conrad Black in 1990 against the O'Reilly-led consortium has been rendered inconclusive by the present regulations.

The first fusillade in the latest skirmish was fired in February last when Kerry Packer signalled his support for the then leader of the Opposition, John Howard. He also raised his Fairfax holding to almost 19 per cent.

This was a flagrant violation of the 15 per cent ceiling imposed on him by the present rules which supposedly carry heavy sanctions but Mr Packer pleaded that he did not have control of the group. In the end, he received a slap on the wrist from the government but this is thought unlikely to lessen his ambitions.

The post-election promise of a review of the current regime kept the pot boiling nicely and it almost boiled over last week when Rupert Murdoch pushed his holding above 17 per cent in the clear expectation that reform would allow him to compete for the titles. Not only is he constrained by foreign ownership clauses, but also because of his interests in competing newspapers. Mr Murdoch also wants to increase his current 15 per cent stake in Channel 7 TV network.

This is where Dr O'Reilly comes in. If the laws are overhauled, the smart money is on Mr Murdoch being forced to off-load his Sydney tabloid, the Daily Telegraph, before control of Fairfax would be contemplated by the government.

The rights issue would give Dr O'Reilly the sort of war chest required to buy a cash cow with 440,000 daily readers and a weekend stablemate with circulation of around a million. Moreover, it would provide him with an entree to a metropolitan market - an aspiration he has long held and one which APN's regional titles cannot satisfy.

Kerry Packer's memorable line in 1992 at the height of the last all-out fight for Fairfax that, "this isn't about money, it's about ego", still holds true today. Dr O'Reilly may not have the same deep pockets as either Murdoch or Packer but he could still benefit from the impending bruises that will surely follow this winner-takes-all clash between Australia's media titans.

But sources in Dublin believe that while Independent/APN will undoubtedly look at any Murdoch title that comes on the market, the Irish group's first priority will be to buy the O'Reilly family trust's 22 per cent stake in APN - worth about £55 million at current prices.

The same sources believe Independent is also more likely to use its current financial firepower to increase its stake in the hugely profitable New Zealand newspaper group Wilson & Horton. Independent and the O'Reilly trust currently hold equal shares of a 45 per cent stake in W & H and are likely to increase their stakes by buying in the market. Alternatively, Independent may buy the O'Reilly interests out of W & H - costing about £100 million at current prices.

Whichever strategy the Irish group adopts, few doubt that Tony O'Reilly has aspirations to add an Australian national title to Independent's portfolio - sooner rather than later.