(Bloomberg) — Tencent Holdings Ltd. played down the impact of Beijing’s heightening scrutiny over China’s biggest internet firms, saying a potential revamp of its $120. President Martin Lau acknowledged that founder Pony Ma called on regulators recently but said it was voluntary and part of regular meetings. Executives reiterated that the regulations. It will stick with its usual practice of while regulators pore over past deals.
Beijing is widening a crackdown on the country’s largest corporations,clout after years of relatively unfettered expansion. Tencent’s attempt to ease investor concern over regulatory scrutiny after it posted . Regulators are considering forcing the firm to overhaul its promising fintech division, similar to Ant Group Co. This month, President Xi Jinping warned he would go after “platform” companies that amass data and , a sign that the internet crackdown isn’t limited to Ant and its backer Alibaba Group Holding Ltd.
“We have always been very focused on compliance, and we will continue to operate strictly in compliance with the rules and regulations,” Lau told reporters on a conference call. He added that any requirements to form a financial holding company would not impact its business. Top executives on Wednesday repeatedly stressed they would go all out to comply with regulations. Tencent, which has acquired stakes in hundreds of startups over the years, reviews past investments to ensure they comply with antitrust requirements. It pledged to safeguard user privacy even as it acknowledged the need to heed Beijing’s call to .
Led by the People’s Bank of China, the government has proposed establishing a joint venture with tech giants to oversee the lucrative. Bloomberg News reported Wednesday that this would significantly escalate regulators’ attempts to tighten their grip over the sector. “Tencent is trying to reassure has substantive differences from Ant,” said Michael Norris, research manager at Shanghai-based consultancy AgencyChina. “While as Ant Group, there may be some bumps along the road. Potentially issues could include scrutiny of or regulatory attention toward promotion and cross-sale of financial products,” he added.
Tencent shares slipped 0.8% before the earnings Wednesday. The stock has dropped about 19% from its January peak, wiping roughly $180 billion off the valuation of Asia’s. 26% to 133.7 billion yuan ($20.5 billion) in the three months ended December, versus the 133.1 billion yuan average forecast. Net income came in at 59.3 billion yuan, with one-time gains contributing over half its profit. That is compared with the 32.9 billion yuan projected. It’s unclear how far Beijing intends to rein in Tencent and its peers. In the short run, investors will likely focus more on how the game publisher could sustain a pandemic-induced entertainment boom while delving deeper into newer businesses like advertising and payments.
All rely on WeChat, the avenue through which Tencent reaches users and markets products, including its biggest gaming hits like Honor of Kings and PUBG Mobile. WeChat hosted $240 billion in transactions for 400 million daily users through the mini-program model it championed. A new short-video feed inside the all-purpose platform is tasked with helping the Shenzhen-based company fend off arch-rival ByteDance Ltd., which has been luring eyeballs away with TikTok’s China clone Douyin. Revenues from online games grew by 29% in the fourth quarter — the slowest pace in about a year — helped by a surge in international games sales of titles like Peacekeeper Elite and the newly launched Moonlight Blade Mobile. That may spur concerns about the longevity of the pandemic-era global gaming boom.
Sales from social networks climbed 27%, partly after Tencent consolidated contributions from Huya Inc. Online advertising revenues increased 22%. Fintech and businesses — the division that oversees Tencent’s various money operations and cloud — saw revenue climb 29%, due primarily to growth in payments and wealth management services. Concerns over whether the pace of expansion can continue have increased after people familiar told Bloomberg News financial regulators are now scrutinizing the unit. Along with Ant, proposed and rein in online consumer lending will damage Tencent’s WeChat Pay prospects and wider fintech business.
Any diktat to fold those operations into a holding company that could be regulated more like a bank would potentially further curb its ability to lend more and expand as rapidly as it has done in. Regulatory headwinds may extend beyond fintech. Earlier this month, Tencent was fined by the for not seeking approval on past investments. The company has been sued by parties, including ByteDance Ltd., over alleged monopolies in its WeChat platform. Beijing has also called on firms to open up proprietary data in search and areas.