Tencent reports its first profit fall in 13 years as game sales slow

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 blamed the slowdown in growth on weak sales of some of its popular gaming titles. The poor performance, which triggered a 2pc sell-off in Tencent shares, came after the Chinese government blocked the sale of Monster Hunter World, which Tencent published in the country. With more than 600m gamers, China is the world’s big- gest video game market.

Monster Hunter World went on sale for only a few days before being banned by the country’s government. It had initially approved its release. Tencent blamed the drop in profits on “nonmonetisation 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.

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-monetised tactical tournament games”. Neil Campling, the Mirabaud Securities analyst, said: “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.”

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.

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 3,000 video game approvals as the agencies involved undergo a shake-up.

Tencent has also been caught up in an ongoing sell-off of Chinese technology stocks amid reports that the US is looking to block Chinese companies from investing in American technology companies that operate “industrially significant technology”.