Government-Owned Websites to be Listed on A-share Market

Market, page 26, issue 469, May 17, 2010
Translated by Tony Liu
Original article:[Chinese]
Ten Chinese government-owned media websites are likely to be listed on the A-share stock market in the next few years, the EO learned.

One or two websites will be listed before the end of this year; People's Daily Online is most likely to be the first.

At present, People's Daily Online is actively recruiting investors, the EO has learned.

China's three oil giants including Sinopec, PetroChina and China National Offshore Oil Corporation (CNOOC) are rumored to be interested in becoming investors in the website.

In response to the rumor, high-level employees of Sinopec and PetroChina told the EO that they were not aware of the matter.

The EO has tried to contact CNOOC for comment on this matter but as of press time has not received a response.

The ten websites include People's Daily Online, Xinhuanet, CCTV Online, Qianlong Network, East Day, E North, Dazhong Network, Voice of China, Zhejiang Online and Sichuan Online.

Last September, Zhu Tao, an official from the Publicity Department of the CPC Central Committee, publicly stated that the department will select some important website corporations to pilot the reform.

The State Council Information Office also claimed it would accelerate the reform of key news website corporations and allow them to recruit state-owned strategic investors to set up a shareholding company and become listed on the stock market once conditions are ready.

In fact, many networks have either already begun or have completed their reforms. Xinhuanet kicked off its reform last year and has been making preparations to be listed on the stock market.

CCTV Online has just finished the transformation of its corporation.

Voice of China has submitted its reform plan and is waiting for the results. East Day, which has attempted an initial public offering twice, has completed the reform of its corporation and is preparing to make a third attempt.

Market observers expressed their worries on the future listing of these websites. Given that most government-run websites have been dependent on funds appropriated by the government for operation, how can they guarantee their profitability after being listed on the stock market?

It is rumored that People's Daily Online will probably be the first to launch its IPO. An industry player said the profitability of People's Daily Online makes it more competitive than other websites. In 2009, it earned a profit of several hundred million yuan, while other websites earned only tens of millions of yuan.

East Day is another website likely to be listed on the stock market this year. The website, backed by Shanghai Municipality, was established in 2000; its registered capital is 600 million yuan.

A Chinese news website has previously successfully been listed on the stock market. At the end of March, Eastmoney, a portal on financial, economic and securities news, began to be listed on ChiNext, and its stock value once reached 140 yuan per share.

Attitudes of Venture Capital Firms

Despite the deep interest domestic and overseas mutual funds have in investing in the cultural industry in fields such as media, the funds have diverse opinions on the future listing of the ten websites mentioned above.

An investment manager at IDG Capital Partners has said that no innovations have been made to these news networks' business models.

He added that while it is a new concept for news websites to go public on the stock market, only a few can obtain significant returns. Therefore, even if a venture capital fund chose to invest in these news websites, it is hard to gage whether they would make profitable investments.

Chen Wei, chairman of Shenzhen-based Oriental Fortune Capital said his company needed to assess the profitability of these news websites, namely whether or not their revenue only depends on traditional advertising services.

Given that China has yet to liberalize its media industry, Zhao Linghuan, president of Hony Capital said investment opportunities in media would depend on the degree of state policy flexibility.

At present, Hony Capital has invested in Jiangsu Xinhua Publishing Group and a televised shopping program - Happigo, which is operated by a Hunan provincial television station.

In addition, the Shenzhen-based Fortune Venture Capital also has a deep interest in cultural fields such as media. The company's president Liu Zhou revealed to the EO that his company was in touch with two news networks.

This article was edited by Rose Scobie