Tencent first quarter profit rises 37pc on-year, driven by online games

First-quarter revenue up 40 per cent on year to 13.5 billion yuan, helped by e-commerce

PUBLISHED : Thursday, 16 May, 2013, 12:00am
UPDATED : Thursday, 16 May, 2013, 3:53am

Tencent, China's biggest internet firm, posted a 37.1 per cent rise in first-quarter profit, bolstered by strong growth in its online game and e-commerce segments.

Net profit jumped to four billion yuan (HK$5.05 billion), from 2.9 billion yuan a year earlier. Revenue increased 40.4 per cent to 13.5 billion yuan.

"Though the first quarter is usually weaker than the second and third quarters, growth in e-commerce and Tencent's social mobile application, WeChat, is very satisfactory," said Dong Xu, an analyst with Analysys International.

Some 194.4 million people were active users of WeChat, known as Weixin in Chinese, in the period, an increase of 228.4 per cent year on year. The app is free to use.

In March, a National Development and Reform Commission official said WeChat should charge its users a fee. Tencent said WeChat would remain free.

"It is impossible for individual subscribers to pay the fee," Dong said. "That's something Tencent won't do."

She said that Tencent had enough capital to pay telecommunications carriers if they charged a fee for the service.

"WeChat is important for Tencent because it helps the company cement its position in the mobile internet market," Dong said.

Tencent said it would continue to invest in WeChat to attract international users.

Revenue from e-commerce transactions soared 154.2 per cent year on year to 1.9 billion yuan.

Revenue from value-added services rose 28.6 per cent year on year to 10.7 billion yuan, with most of it coming from online games.

Revenue from online games alone climbed 19.3 per cent quarter on quarter to 7.5 bil- lion yuan, benefiting from the Lunar New Year holidays and the winter break for students, the firm said.

Half of the top 10 online games in China were developed and run by Tencent, Bank of Communications said in a report in March.

Shares of the Shenzhen-based company climbed 1.7 per cent to HK$274.40 yesterday in Hong Kong, outpacing the benchmark Hang Seng Index's 0.5 per cent rise.