Tencent finished Q3 with strong result despite regulation

Gaming and chat specialist Tencent has reported a strong third-quarter profit despite ongoing issues with Mainland China regulatory authorities over its gaming software. Tencent’s share price has fallen by about one third this year, shedding US$165 billion off its value, although last year its share price doubled. In September the company announced a restructuring program aimed at lessening its reliance on games and expanding its interests into areas such as cloud and industrial services in the transport, fintech and healthcare sectors.

Tencent profit in the September quarter rose 30 per cent to RMB23.3 billion (US$3.36 billion) which exceeded analysts’ forecasts. This was partly due to fair-value gains from the IPO of food delivery service Meituan Dianping.

Growth in its gaming division was ahead of expectation, but the company was unable to update shareholders on the status of its negotiations with mainland government officials over a regulatory block which has frozen new game approvals. The government has yet to decide on whether or not to allow Tencent to begin charging for features of its popular PUBG Mobile game. Chinese authorities are concerned that many Chinese are becoming addicted to mobile games.

Those roadblocks were cited as the reason Tencent’s growth rate – a respectable 24 per cent, nonetheless, to US$11.6 billion – was its slowest quarter in more than three years.

Sales of smartphone games grew 7 per cent year on year and 11 per cent quarter on quarter, while advertising sales, the company’s single largest revenue source, rose 47 per cent

Revenue from cloud and payment services (WeChat Pay) helped fuel a 69 per cent increase in Tencent’s “other” revenue category.