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* Fairfax to restructure Sydney Morning Herald, The Age

* About 1,900 jobs to go, sees annual savings of A$235 mln

* Media (Frankfurt: 725292 - news) sector in major shakeup, News Ltd seen cutting staff

* Fairfax confirms Rinehart has lifted stake to 18.7 pct

* Fairfax shares rise 7.4 pct, market up 2 pct (Adds investor comment)

MELBOURNE, June 18 (Reuters) - Australia's Fairfax Media (Munich: 884229 - news) , publisher of some of the country's leading newspapers, will overhaul its top mastheads and slash almost one-fifth of its staff, the beginning of a widespread shakeup of Australia's media sector.

The media industry's old guard is struggling with a massive shift online, declining advertising revenues for newspaper and TV, and shrinking market share for free-to-air TV as consumers' choices multiply for news and entertainment.

Fairfax - which publishes the 181-year-old Sydney Morning Herald, Australia's oldest newspaper, as well as the Australian Financial Review and Melbourne's The Age - said it will cut 1,900 jobs over three years from its staff of 10,000.

It will also shut two printing plants and reduce broadsheet newspapers to tabloid formats as it refocuses towards online distribution.

"All the world's newspaper companies are experimenting with what sustainability looks like," said Margaret Simons, the head of the University of Melbourne's Centre for Advanced Journalism.

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UPDATE 3-Australia's Fairfax to slash newspaper jobs as media landscape shifts