Firms buy stakes in online reading service

Three companies spend $22m to purchase part of product launched by China Telecom

Three Chinese media companies will spend 138.92 million yuan ($22.24 million) to buy stakes totaling 20.7 percent in E-surfing Reading, an online reading service launched by China Telecom.

China Telecom, one of China's three State-owned carriers, on Monday signed a contract with ChineseAll.com, Phoenix Publishing & Media Inc and Xinhuanet Co, which will develop the carrier's four-year-old E-surfing Reading service.

"The participants [of the deal] will contribute their own advantageous resources, and support E-surfing Reading in expanding its channels, marketing and sales and managing copyrights," according to a statement e-mailed by China Telecom to the Global Times on Monday.

The announcement was made as an increasing number of Chinese switch from computers to smartphones to read e-books. As of the end of June, some 527 million, or 83.4 percent, of Chinese nationals used smartphones to surf the Internet, the China Internet Network Information Center reported on Monday.

Shanghai-listed Phoenix Publishing & Media said in a statement released Monday evening that it would spend 40.04 million yuan to buy a 5.97 percent stake in E-surfing Reading, while the amount of investments by the other two companies remains unknown.

Xiang Ligang, CEO of telecom information portal cctime.com, told the Global Times on Monday that the deal will provide the capital that E-surfing Reading needs and add more content to users of the product.

"The three investors are major news, books and article providers in China. Their investment will diversify E-surfing Reading's product portfolio and attract more users," Xiang said.

E-surfing Reading, launched in May 2010, had a share of less than 2.13 percent in the booming online reading market in the first quarter, according to statistics published by the research arm of Beijing-based SooToo.com Inc on May 14.

The deal shows China Telecom's attempt to open up further by bringing in fresh capital and innovation, as the Chinese government advocates the advantages of mixed-ownership companies, the carrier said in the statement.

On July 15, the State-owned Assets Supervision and Administration Commission announced that six State-owned enterprises will join a pilot program to seek reforms in their ownership and management.

The biggest player in China's online reading scene is iReader, which has 34.28 percent of the market share in the first quarter, SooToo reported.

It is followed by Shuqi.com, with 12.95 percent, and China Mobile's e-reading product, called "He Yuedu," with 10.28 percent, SooToo said.

China Mobile, the world's largest carrier by subscribers, is doing a better job than China Telecom in the online reading market because the former owns more subscribers, said Xiang.

"Carriers usually package their online reading products with other services and sell them to subscribers as a whole," he said.

"Therefore, for carriers, the number of subscribers is as vital as the content on the online reading products," he noted.

China Telecom's subscribers shrank by 980,000 to 180.24 million in June, the company reported on Monday. China Mobile had 1.27 billion subscribers in June, up 0.32 percent from May, the company said on Monday.

Yao Haifeng, an analyst at Analysys International, told the Global Times on Monday that China Telecom is spending a lot of effort to develop audio books, which will likely be one of its strengths in the future.