Tencent, the largest internet company in China, reported a sharp drop in profit for the final quarter of 2018 as a government freeze on online game approvals hit revenue in that business area, which accounts for nearly a third of total turnover.
The company’s Q4 net profit dropped 32 per cent to CNY14.2 billion ($2.07 billion), with total revenue increasing 28 per cent to CNY84.9 billion. The company said the profit decrease was affected by non-cash expenses related to raising capital at a subsidiary in Q4.
Online games revenue was flat year-on-year at CNY24.2 billion, with its smartphone games business growing 12 per cent to CNY19 billion.
Ma Huateng, Tencent chairman and CEO, said: “During the year, we stepped up our investment in innovation and technologies to stay competitive in the evolving internet industry.”
Capex for the full year jumped 76 per cent to CNY23.9 billion as it increased investment in its cloud and mobile payments businesses to make up for declines in gaming.
The chairman said it released nine licensed games in Q4, with eight new games (seven smartphone and one PC) approved by the government after the moratorium was lifted.
“Since there is a sizeable backlog for applications in the industry, our scheduled game releases will initially be slower than in some prior years. We have implemented our upgraded Healthy Gameplay System in 39 smartphone games. The system resulted in minors spending significantly less time in the affected games, but has had an immaterial impact on time spent by adult players,” he explained.
The executive added a new Tencent Game Guardian platform enables parents to engage with their children and track their in-game activities online: “We recently provided teachers access to this platform to enhance their engagement with their students who play games. These initiatives built a pilot case for the China game industry and, we believe, help position it for sustainable and healthy growth in the long run.”
Revenue from its value-added services business, which includes online games and messaging, increased 9 per cent over Q4 2017 to CNY43.7 billion. Social networks revenue grew 25 per cent to CNY19.4 billion. The company said the increase mainly reflected growth in its digital content services, such as live broadcast services and video streaming subscriptions.
Tencent’s online advertising business revenue jumped 38 per cent to CNY17 billion.
The combined number of monthly active users (MAUs) on its Weixin and WeChat social media platforms grew 11 per cent year-on-year to CNY1.1 billion in 2018. Its IM app QQ registered an increase in smart device MAU of 2.5 per cent year-on-year to 699.8 million.
For the full year, Tencent’s net profit rose 10 per cent to CNY78.7 billion, while total revenue increased 32 per cent to CNY313 billion.Subscribe to our daily newsletter Back