Tencent News: Tencent posts slowest-ever sales rise; regulation impact set to ease

Shanghai: Chinese social media and gaming giant Tencent’s revenue grew just 8% in the fourth quarter, the slowest pace since going public in 2004, reflecting regulatory scrutiny that has hurt both its gaming business and advertising sales.

China has halted sanctions of the game and cut gaming time for under-18s since August last year, after years of unbridled growth, in a bid to tighten Beijing’s control over industries including its society and technology.

This has also led to a slowdown in advertising as businesses cut spending.

Tencent Holdings, which derives most of its revenue from gaming and develops games such as ‘Honor of Kings’ and ‘Call of Duty Mobile’, said domestic gaming sales grew 1% in the quarter ended December 31.

The restrictions on minors were in effect as the total time spent by minors on their games was reduced by 88%, Tencent said, adding that the impact of this factor on revenue growth would lessen later in the year.

“As we move into the latter half of 2022, it should stop impacting revenue growth,” Chief Strategy Officer James Mitchell told reporters on a call Wednesday, referring to modest safeguards.

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Tencent president Martin Lau said regulators are still supportive of the gaming industry, adding that the company had a ready pipeline of games when approvals resumed.

The company, which reported its slowest annual revenue growth of 16%, said revenue in its online advertising business fell 13% in the fourth quarter.

It expects growth in its advertising business to resume in late 2022 after companies adjust to regulatory requirements.

Data from Refinitiv showed total revenue rose to 144.2 billion yuan ($22.63 billion) in the quarter, lower than the average of 147.6 billion yuan expected by 17 analysts.

Beijing has also issued rules to regulate financial holding companies, instructing Tencent peer Alibaba affiliate Ant to turn itself into a financial holding company with no capital restrictions.

Lau, who previously said that creating a financial holding company would not affect its business, reiterated his stance on Wednesday and said Tencent was continuously discussing whether it qualifies for such a license.

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“Going forward, we think we’ll continue to see new rules, but the incremental rules will be less than what happened in the first few years,” Lau said.

He said he expects workforce growth this year to be much slower than in previous years as companies focus more on efficiency and cost.

Reuters has reported that Tencent’s chief executive, Pony Ma, told employees at the end of 2021 that the company should prepare itself for “winter”, and that it and Alibaba combined into one of its largest Were preparing to cut jobs. layoffs Read more

Tencent’s stock has lost more than a third of its value in the past 12 months, while Alibaba’s stock has lost more than half.

Still, their stocks rose in recent days after Chinese Deputy Prime Minister Liu He said last week that Beijing would launch support for the economy and keep markets stable. read more

Tencent said on Wednesday that its adjusted profit for the December quarter fell a quarter to 24.9 billion yuan as costs rose.

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