Regulatory delays slow Tencent Holdings growth

Tencent Holdings has recorded its first quarterly fall in profits in 13 years, hampered by government delays in approving new online games.

Second-quarter profit fell 2 per cent to RMB 17.9 billion (US$2.6 billion) on sales totalling RMB 73.7 billion ($10.65 billion).

The company’s mobile games business revenue fell 19 per cent quarter-on-quarter to RMB 17.6 billion due to delays in the launch of new games and failure to gain approval for charging fees on popular tactical tournament games.

“This is the worst result in recent memory from Tencent, with the first quarter-on-quarter fall in profits in 13 years and major disappointment on mobile gaming revenue and margins,” said Douglas Morton, the head of research in Asia at Northern Trust Capital Markets in an investor note.

“The miss, however, was driven purely by regulatory delays to game approvals, meaning the long-term story for Tencent may well remain intact.”

Another analyst, He Saiyu, from Huatai Financial Holdings, wrote that gaming revenue growth should remain positive later in the year due to increased monetisation of existing games.

“Mini programs should help to boost Tencent’s cloud, advertising and online payments business grow.”

He said user traffic and engagement levels across all its major platforms, including WeChat and QQ are all growing at a healthy pace.

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