Tencent under pressure to up its game as regulatory restrictions bite
HONG KONG: Tencent Holdings, which has lost some US$200 billion (RM829.4 billion) in market value this year, is facing fresh criticism from analysts and investors unnerved by regulatory roadblocks, a fuzzy overseas strategy and growing debt.
The gaming and social media firm is one of a number of Chinese internet companies whose prospects are suddenly in question after years of spectacular growth. But Tencent’s fall, triggered mainly by a government crackdown on online gaming, has been especially dramatic.
In the latest setback, Tencent on Monday shut an online Texas Hold’Em poker game in response to government scrutiny.
The authorities have frozen approval of new games and prevented Tencent from making money on some of its most popular titles, moves attributed to concerns about internet addiction and the violent and salacious content of some games.
“There is no sign the government has the will to loosen its grip on contentrelated businesses,” said Max Guo, associate director of investment at Zeal Asset Management in Hong Kong.
The domestic regulatory troubles, combined with a weakening Chinese economy, have laid bare Tencent’s failure to develop a viable international strategy, some analysts say. The company’s WeChat messaging app, ubiquitous in China for everything from payments to entertainment, has gained little traction overseas.
As of 2016, Tencent was getting just 5% of its revenue from international operations, according to Eikon data, the latest available, compared with more than half for US internet giants like Google and Facebook.
“China is going to run out of growth soon,” said Richard Windsor, an independent analyst with Radio Free Mobile. But international expansion is getting tougher by the day, he said, as consumers in other countries become accustomed to rival mobile apps.
Compared with homegrown rival Alibaba Holdings, which is known for a more aggressive investment style that often involve acquiring controlling stakes and forming joint ventures, Tencent tends to take minority stakes in strategic investments. – Reuters