People.com.cn, the online arm of China's People's Daily newspaper, will soon launch its initial public offering (IPO) in the domestic A-share market as the nation accelerates its marketization of State news portals.

People's Daily Online Co Ltd, which operates People.com.cn, plans to issue 40 million A-shares at 15-20 yuan ($2.27-3) a share, through an IPO in Shanghai at the beginning of this year.

The IPO will make the company the first news website to go public in the domestic market.

"People's Daily Online is now at the final stages of bringing in strategic investors," a source who has direct knowledge of the matter told China Daily.

The company has been in talks with more than 10 potential investors from within the country and has already reached agreements with China Mobile, China Unicom, China Telecom, China Life Insurance and some domestic private equity firms.

People's Daily Online, which generates revenues mainly from advertising, plans to use proceeds from the equity sale and planned share sale to diversify its website business.

"We aim to build People.com.cn into an internationally recognized website," Zhang Yannong, president of People's Daily, said at a media conference.

The IPO plan comes after Goso.cn, a news search engine launched by People's Daily, officially became operational on Dec 19.

The company also plans to expand into wireless value-added services, online video and public opinion survey services to boost revenues and build the website into an international multiple media.

However, compared with established commercial news portals, such as Qq.com and 163.com, People.com.cn lags behind in terms of traffic.

According to figures from Internet traffic tracker Alexa.com on Tuesday, People.com.cn ranks 47th in China, compared with Qq.com, which is second, and 163.com, sixth. Xinhuanet.com ranks 35th in terms of traffic.

But analysts said that a website like People.com.cn has its own advantages compared with its competitors.

"The website can make use of its credibility as an official channel for the government to release information, which can help it generate content other commercial news portals don't have," said Pi Shun, an analyst with CITIC Securities Co Ltd.

People's Daily Online's IPO plan is part of the country's efforts to convert State-owned enterprises and institutions in the cultural sector into market-oriented players in a bid to improve their operational efficiency.

The Central Economic Work Conference in early December said the nation will deepen reform of the cultural sector to make the industry a pillar of the national economy.

The country has announced it will encourage 10 government-backed news websites to undergo reforms prior to public listings, including three national news portals Xinhuanet.com, People.com.cn and Cntv.cn.

Cntv.cn is also restructuring itself to become a shareholding company, according to Wang Wenbin, general manager of the site. After the reform, the company will introduce strategic investors to prepare for an IPO.

"Government-backed websites used to receive support from the government, but with their IPOs, they will have to try more means to increase their profits and become a market-based company," said Wu Yi, an analyst with Guotai Junan Securities Co Ltd.

People's Daily Online earned a net profit of 22 million yuan in 2009, with a revenue of 190 million yuan from its major business.

CITIC Securities, which will underwrite the company's IPO, has estimated that the company's net profit will be 70 million yuan in 2010 and rise to 100 million yuan this year.