People walk past a Tencent sign at the company headquarters in Shenzhen, Guangdong province, China. Picture:REUTERS/DAVID KIRTON
People walk past a Tencent sign at the company headquarters in Shenzhen, Guangdong province, China. Picture:REUTERS/DAVID KIRTON

Hong Kong — Chinese gaming and social media group Tencent Holding, partially owned by Naspers spin-off Prosus, on Wednesday reported a market-beating 26% jump in quarterly sales, helped in part by a surge in revenue from its online gaming business.

Revenue rose to 133.67-billion yuan in the quarter ended December, vs market expectations of 132.19-billion yuan, based on data from Refinitiv.

Tencent, which has benefited from a surge in paying users for games in China and international markets, said online games revenue rose 29% to 39.1-billion yuan.

Profit rose 175% in the same period to 59.3-billion yuan, largely due to fair-value gains in companies that Tencent has invested in, and sales of stakes.

Tencent’s two hit games, Honor of Kings and PUBG Mobile, continued to top the rankings in China and internationally, respectively, in this quarter.

However, Tencent is facing mounting competition from ByteDance, the owner of TikTok, and the similar short-video platform Douyin, which have made sizeable inroads into the games business.

ByteDance outbid Tencent last week to acquire Shanghai-based gaming studio Moonton Technology, which is most famous for its Southeast Asia sensation Mobile Legends.

Tencent is also locked in litigation battles with ByteDance, which has alleged that Tencent has engaged in monopolistic behaviour. Tencent has alleged that ByteDance “illegally obtains WeChat users’ personal information”.

China’s tech giants have faced an antitrust crackdown by authorities in 2021, which analysts fear could target other internet groups after first focusing on billionaire Jack Ma’s Alibaba business empire.

Tencent’s founder Pony Ma met China’s antitrust watchdog officials earlier in March to discuss compliance at his group, Reuters has reported, citing two people with direct knowledge of the matter.

In a media call post-results, Tencent president Martin Lau said during the meeting, which was voluntary, “we have discussion about a broad range of topics, and the main focus is actually on creating a healthy environment for innovation to happen in China”.

China has issued new rules to regulate financial holding companies, and directed Alibaba-affiliate Ant to turn itself into a financial holding company with capital restrictions and other requirements.

Asked about the prospect of creating a financial holding company for Tencent, Lau said the financial holding company corporate structure provides an operating framework and is neutral in nature.

“As we understand, turning into a financial holding company should involve organisational change but does not impact businesses,” he said.

Pony Ma, who attended the call, said Tencent was working with regulators on compliance, including combing through some of its previous investments, while chief strategy officer James Mitchell said the company would stick with its normal practice of acquiring minority stakes in Chinese start-ups.

Reuters

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