Xinhua online portal files for IPO

Hopes can bring in capital, help improve management and business model

The Internet portal of China's State-owned Xinhua News Agency has filed the prospectus for its IPO to China's top securities watchdog, which analysts said Sunday is intended to facilitate the portal's transformation into a modernized entity to cope with fierce competition in the new media industry.

According to the prospectus posted on China Securities Regulatory Commission Friday, xinhuanet.com plans to issue 51.9 million new shares to raise 1.5 billion yuan ($240.2 million) on the Shanghai Stock Exchange.

If the plan proceeds without any issues, -Xinhuanet will be the second State-owned media website to go public in China, following the listing of people.com.cn, an online portal of People's Daily, in April 2012.

The country will see more digital arms of its publicity organs, such as that of CCTV, go public in the coming years, said Chen -Shaofeng, deputy dean of the Institute for Cultural Industries at Peking University.

"The government encourages State-backed traditional media outlets to seek IPOs to help maintain their mainstream standing in the Internet arena," Chen told the Global Times Sunday.

On Wednesday, CNR Mobile, a mobile subsidiary with China National Radio (CNR), said it had rolled out its shareholding reform to prepare for its floating on the country's A-share market.

IPO can bring in capital, as well as innovate and improve the official media's ineffective management and business model, said Hou Tao, vice president with Beijing-based entertainment industry consultancy Entgroup.

"Mainly relying on the government's support is likely to slow down the business expansion, making it hard to compete with scrappy Internet companies," Hou told the Global Times Sunday.

Based on a sample set of Internet traffic seen on Sunday, Xinhuanet was ranked 69th among global websites, while domestic private portals, such as sina.com.cn and qq.com, were 14th and seventh respectively, according to US-based website ranking company Alexa Internet.

Hou's opinion was echoed by Wang Qiu, the head of CNR. Wang was quoted by cnr.cn as saying on Wednesday that reformation and getting listed can boost the creation of an efficient capital platform and help traditional media stand out in the promising new media industry.

Xinhuanet has been decreasing its reliance on the government's service purchases. In 2013, service fees for the construction and operation of State-level governmental websites contributed to 13.98 percent of total revenues, narrowing down from 16.23 percent in 2012, read the prospectus.

The company's revenue mainly comes from online advertisement incomes, which hit 290 million yuan in 2013, accounting for 63.67 percent of the overall revenue. And net profit in 2013 recorded 168 million yuan, compared to 136 million yuan in 2012.

Given its fairly good performance and news resources from various Chinese ministries, Xinhuanet's IPO is likely to be appealing to domestic investors, but as a latecomer it will find it harder to attract as much as interest as people.com.cn did, said Chen.

People.com.cn floated on the Shanghai bourse on April 27, 2012. It raised 1.38 billion yuan, more than doubling its target of 527 million yuan, which analysts said is mainly because investors were motivated by newly issued government support policies for the media industry in 2012.

In addition, Hou noted that Xinhuanet's attractiveness to investors will be unlikely to last for long, unless the company can figure out a unique positioning and targeted content on the mobile front.

A report by Beijing-based iResearch estimated that China's mobile Internet industry would be worth 600 billion yuan in 2017, a big increase from 105.98 billion yuan in 2013.

While the revenue from Xinhuanet's mobile Internet business accounted for 8.37 percent of the total amount in 2013, the company appears to know the significance of tapping the promising mobile Internet market.

According to the prospectus, the capital fundraised in the stock market would be mainly applied to the construction of a clouding platform and the development of its mobile Internet operation.