Tencent's shares down as China declines new game

Kevin Frayer  Getty Images

Kevin Frayer Getty Images

The Chinese tech conglomerate said that its net income for the three months that ended in June was 17.9 billion yuan ($2.6 billion), a decline of 2% compared to the same period past year.

Some analysts expect Tencent to post a drop in mobile gaming revenue when it announces earnings for the most recent quarter later on Wednesday.

Tencent reported its first profit decline in almost 13 years Wednesday.

Company president Martin Lau said "the biggest issue" before Tencent could return to rapid revenue growth was to gain regulatory approval to start charging for its PlayerUnknowns' Battlegrounds (PUBG) video game in China, while confirming a sector-wide freeze for new game approvals in the world's largest gaming market due to a government restructuring.

The Shenzhen-based company surpassed US$500 billion in market value previous year, becoming the first Asian company to achieve the distinction.

Tencent delivered disappointing second quarter results as the Chinese technology giant struggles with regulatory hurdles for its gaming business. The title secured more than one million pre-orders on WeGame in China prior to its release last Wednesday.

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The company had previously announced it would initially launch its 5G network in nine cities in 2019, including New York City and Los Angeles.

A crackdown by the Chinese government on online content has also spilled over to gaming, with the industry accused of fostering addiction.

Shares of Naspers Ltd., the biggest investor in Tencent and considered a proxy for the stock, fell 10 per cent in Johannesburg.

The results were dragged down by slowing growth in mobile gaming and a decline in PC gaming. Those steps include "deepening engagement" with its existing major titles and "monetising" popular tactical tournament games.

Bloomberg reported that it has been four months since China's regulators approved any new games for sale in the market.

Lau said Monster Hunter was blocked because its content "was not exactly compliant", adding Tencent was working with the developer to adjust the content for future approval.

Anonymous sources supposedly familiar with the matter told Bloomberg that a shake-up within the Chinese government has caused a lack of clear leadership in the National Television and Radio Administration and the ministry of Culture and Tourism. A closely watched Communist Party newspaper publicly chastised Tencent a year ago over the game, claiming it caused addiction in young people. Monthly active users climbed nearly 10 per cent to 1.06 billion in the June quarter - a massive population of consumers not just for games and ads but also fledgling services from video to financial services. With that ratio reportedly set to increase to 100 per cent from 52 per cent as of July, Tencent pledged to seek alternative ways to monetise its payment business. Perfect World ended 0.11 per cent lower and 37 Interactive was down 0.86 per cent, after both fell more than one per cent earlier in the session.

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