Tencent’s revenue growth hit by China’s regulatory crackdown

Chinese technology group Tencent has reported the slowest growth in its revenue since Beijing’s sweeping regulatory prospect forced the company to divert resources from game development and the advertising market slowed.

The group’s third-quarter revenue climbed 8 percent year-on-year to $ 144.2 billion ($ 22.6 billion), the weakest pace since Tencent traded in 2004.

Beijing introduced a barrage of regulations last year, including new rules restricting children to almost Three hours of play week. While Tencent said its dependence on younger people was limited, James Mitchell, Tencent’s chief strategy officer, said Wednesday that the process of obedience and restricting minors’ access to its games has hurt revenue growth.

“Some of our game teams have focused on implementation[regulations]. . . Instead of creating new content for games, “Mitchell said.

Local gaming revenue has risen by only 1% in the last three months of last year, down from 5% in In the previous quarter.

Tencent’s results were also hurt by a softer online advertising market due to a combination of a broader slowdown in Chinese real estate and as education-to-technology sectors reduced their spending. Advertising revenue fell 13% in the quarter to $ 21.5 billion from last year.

“Online advertising has been hit hard by regulatory tightening of the education and gaming sectors,” said Ke Yan, an analyst at DZT Research who publishes on the Smartkarma platform.

Despite slower revenue growth, Tencent’s net profit climbed 60% to Rmb94.9bn – a figure that helped when the company posted a profit of Sell ​​his share In the Chinese e-commerce group during the quarter.

Bo Pei, a technology analyst at US Tiger Securities, said the slowdown in revenue is expected in the face of growing challenges facing the U.S. economy. However, he added that “recovery [for Tencent in the second half] It is very realistic. “A more supportive policy is supposed to help improve macro in China throughout the year.”

While it seeks to adapt to regulatory changes, Tencent has said it is committed to achieving more sustainable growth.

“For several years industry participants have overemphasized zero-sum competition, aggressive marketing, reckless expansion and short-term growth,” said Martin Lau, president of the company. “As a result, the growth of the industry has become whipped and unhealthy.”

Tencent executives also said they expect to hire fewer workers this year, while workers in unprofitable businesses will move to other parts of the company.

Tencent executives have been asked whether WeChat Pay, which along with Alibaba’s Alipay, is a major force in China’s mobile payments market, will have to be integrated into a newly formed financial holding company. This is a result that analysts say could hurt Tencent’s profits.

“We are constantly looking at setting up a financial holding company and looking at the regulation regarding it… And whether we will be required to do so,” Lau said.

Tencent will distribute a final dividend of Hong Kong $ 1.60 (US $ 0.20) per share.

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