Web Portals Face Overhaul

Article excerpt

Internet portals are scrambling to restructure their businesses in

China after a top industry regulator said web companies must shed their content services before seeking overseas stock listings.

The changes will not be without risk for the companies or the investors who buy into their issues.

The firms are putting key revenue-spinning operations under the control of others, with management and shareholders taking on faith that the resulting complex structures will work.

But most industry analysts believe the potential of the huge, largely untapped China market makes the risks worthwhile.

The concerns were sparked when Wu Jichuan, head of the Ministry of Information Industry (MII), was quoted by a state newspaper as saying domestic Internet companies must spin off their content-related businesses and assets if they want to list shares abroad.

"There has been a flurry of activity since that comment," said Jeanette Chan, who advises Internet companies at law firm Paul, Weiss, Rifkind, Wharton & Garrison in Hong Kong.

"A lot of people will have to restructure," she said.

The regulation apparently reflects China's concerns about surrendering control over the flow of on-line information -- especially politically sensitive news.

Industry executives and lawyers are interpreting Wu's comment to mean companies must hand control of their Web portals to wholly Chinese-owned companies before they can offer shares. …