Profit at China's Tencent falls for first time in 13 years
Chinese technology giant Tencent unveiled its first profit fall in 13 years after a sluggish performance from its mobile gaming division.
Profits for the most recent quarter fell to 17.87bn yuan (£2bn), below the 19.67bn yuan expectation of analysts.
Tencent, the second most valuable firm listed in Asia and one of the largest constituents of the MSCI Emerging Market index, blamed the slowdown in growth on weak sales of some of its popular gaming titles.
The poor performance, which triggered a 2 per cent sell-off in Tencent shares, came after the Chinese government blocked the sale of “Monster Hunter World”, which Tencent published in the country. With over 600 million gamers, China is the world's biggest video game market.
Monster Hunter World went on sale for only few days before being banned by the country's government. It had initially approved its release.
Tencent blamed the drop in profits “non-monetisation of popular tactical tournament games and timing of new game releases". The announcement led to a sell-off in other technology shares in Asia and the US.
Tencent owns 40pc of Epic Games, the developer of “Fortnite”. The popular video game pits 100 players against each other and is free to play on mobile phones and games consoles. The game has been downloaded more than 40 million times since its launch in July 2017.
It is also publishing the smartphone version of “PlayerUnknown's Battlegrounds”. However, delays in publishing these games in China has affected the company’s gaming revenue.
Tencent said that daily active users of its games “grew at a double-digit rate year-on-year, but monetisation per user declined as users shifted time to non-monetized tactical tournament games.”
Mirabaud Securities analyst Neil Campling said that “Chinese gamers want to play the battle royale format games which are only accessible on servers not located in China as the regulators still haven’t approved these titles.
“One way to mitigate this is to launch new survival play modes in existing games.”
Technology intelligence - newsletter promo - EOA
Tencent revenue rose 30pc to 73.68bn yuan, below analyst estimates of 77.5bn yuan.
The company also owns and operates popular messaging app WeChat, which now has 1.06bn users.
What is Fortnite: Battle Royale?
China is reforming the way it approves video games, leading to a logjam in the release of thousands of titles. Beijing has reportedly frozen about 3000 video game approvals as the agencies involved undergo a shake-up.
Tencent has also been caught up in an ongoing selloff of Chinese technology stocks, which has driven down the company’s share price.
Chinese technology companies, including Tencent, Baidu and Alibaba, have seen their stock prices fall amid reports that the US Treasury Department is looking to block Chinese companies from investing in US technology companies that operate “industrially significant technology”.
