Profit margins at Tencent Holdings are expected to remain flat as a mainland crackdown on short-messaging services (SMS) hampers the company's ability to aggressively promote the product. Its third-quarter margin was expected to remain at 42 per cent, level with the first and second quarters, and down on the 48 per cent margin in the second quarter of last year. Tencent is the mainland's largest provider of computer instant messaging services. The company also provides value-added services (VAS) which allow users to send messages between computers and mobile phones. 'We believe SMS will be volatile as Chinese operators are cleaning up the mobile VAS sector,' chief executive Pony Ma Huateng said yesterday. The mainland's largest mobile-phone carrier, China Mobile, last week suspended the services of several companies for providing adult content or spamming customers. Twenty-two companies have been affected, including Sina.com, Sohu.com, Mtone Wireless, Kongzhong and Go2joy. 'We will be more careful in our content offerings ... and closely monitor the degree of satisfaction with our [product],' Mr Ma said. Tencent yesterday said SMS sales fell 1.3 per cent to 131.08 million yuan in the second quarter from 132.81 million yuan in the first quarter. Although Tencent remains in China Mobile's favour, the industry crackdown has forced others to give more consideration to their business and marketing practices. Cazenove analyst Stephen Ng wrote in a recent report: 'We suspect China Mobile intends to use the incident as a warning to service providers in general to drive a clean-up of the content being provided over its network. 'In the near term, Tencent shares were expected to be weak due to the uncertainty created by China Mobile's punitive actions.' Tencent shares fell 0.67 per cent yesterday to $3.70 - unchanged from its initial public offering price. The firm delivered its first result after its main-board listing with a profit of 113.28 million yuan for the second quarter to June, up from 107.3 million yuan in the first quarter. Revenue grew 4.79 per cent quarter on quarter to 270.51 million yuan.