HONG KONG – Chinese internet giant Tencent said on Thursday, March 21, net profit plunged 32 percent in the fourth quarter in its sharpest quarterly decline as the company weathered tightened regulations on gaming.
Shenzhen-based Tencent said net profit came in at 14.23 billion yuan ($2.13 billion) in the 3 months ending December 31, missing a Bloomberg average analyst estimate of 17.55 billion yuan.
Known for its ubiquitous WeChat social media and messaging program, Tencent felt the squeeze as China's government effectively froze approvals of new game titles for months last year, officially due to youth gaming addiction concerns.
The hiatus, and tighter restrictions on game-playing, saw a stunning amount lopped off of Tencent's total market value – around a quarter of a trillion dollars – by the time the results of the preceding quarter were announced in November.
Shares in the Hong Kong-listed company fell 1.9% Thursday ahead of the report. They have risen 15.6% so far this year.
But revenues were up 28% at 84.9 billion yuan in the fourth quarter, and rose 32% last year to 312.7 billion yuan driven in part by advertising.
The mobile game business grew 12% in the fourth quarter to 19 billion yuan and 24% last year to 77.8 billion yuan.
Monthly active users of WeChat and Weixin climbed close to 1.1 billion.
The gaming giant said its popular mobile games "expanded our user base and increased time spent" but added their measures to curb underage video-game playing as part of the government crackdown were effective.
It said it released nine licensed games in the fourth quarter and eight games by Tencent have been approved since China's regulator resumed approving new titles in December after a nine-month freeze.
But it warned their scheduled releases would initially be slower due to a "sizeable backlog" in the applications for game monetisation licenses.
"Mobile game revenues at 19 billion yuan was actually decent because last quarter was 19.5 and typically the fourth quarter is seasonally slow," Bloomberg Intelligence analyst Vey-Sern Ling told Bloomberg News.
"Given they have new games in the first quarter I think the 19 billion number bodes well for a mobile game recovery into 2019," said Ling.
But analyst Dickie Wong of Kingston Securities said the slow approvals and limits imposed on young online gamers mean there would be "some negative impacts on its gaming revenues".
The company said Thursday looking ahead it will "embrace the trend of the Industrial Internet" and invest in core infrastructure and frontier technologies while continuing to "drive the evolution" of its consumer-focused internet services. – Rappler.com