Tencent, the world's third-largest internet company by market capitalisation, said yesterday that China's crackdown on mobile text messaging was starting to hurt its business.
The warning by the company, which operates the world's most popular instant messaging service and online games with titles such as Dungeon & Fighter, is an early indication that China's strict censorship regime could start to have an adverse impact on the country's internet boom.
Tencent said the visibility on the outlook for its mobile services business, which accounts for 17 per cent of its revenues, was low.
“We might feel a negative impact from the regulatory environment,” said Martin Lau, president, as the company reported a surge in 2009 profits and revenues. “The operating environment is getting more challenging.”
Over the past 15 months, the Chinese government has stepped up a crackdown on what it calls “harmful content”. While the authorities argue that the measures are aimed at pornography and spam, website closures and text messaging blockages have also hit politically sensitive content.
Tencent management said the government's surprise decision in late November to halt WAP billing – a practice that allows consumers to buy online content and have it charged directly to their mobile phone bills – had also made a dent in the fourth quarter and would do more damage this year.
Mr Lau added that attempts by China Mobile, the world's largest mobile operator, to weed out “bad” content by blocking certain content providers from sending text messages had also produced collateral damage for the industry.
Tencent's business is based on its QQ instant messaging service which boasts more than 500m active accounts. Over the past few years, the company has built a broad offering of social networking applications, virtual goods and online games.
After a 215 per cent rise in its share price over the last year, Tencent's market capitalisation now ranks behind only Google and Amazon among internet-related companies.
Net profits for the company jumped 85 per cent last year to Rmb5.15bn ($754m) while revenues climbed 42.5 per cent to Rmb12.4bn. Shares in the company edged 0.1 per cent higher HK$165 in Hong Kong.
