March 19, 2014 / 10:31 AM / 5 years ago

UPDATE 2-Tencent sharpens focus on WeChat expansion

* Tencent Q4 net income up 12.9 pct to 3.91 bln yuan

* WeChat Q4 revenues 200-300 mln yuan

* Tencent proposes five-for-one share split (Adds WeChat revenues, share split, CTO departure)

By Paul Carsten and Yimou Lee

BEIJING/HONG KONG, March 19 (Reuters) - Tencent posted its slowest quarterly profit growth in almost two years after heavy spending to promote its mobile messaging app WeChat and e-commerce sites in competition with Alibaba Group .

China’s largest listed internet company also gave an indication of WeChat revenue figures for the first time as it transforms from a messaging service to fully fledged mobile platform for everything from social networking and gaming to personal finance and booking taxis.

WeChat’s fourth-quarter revenue was between 200 million yuan and 300 million yuan ($32-49 million), Tencent President Martin Lau told reporters after Wednesday’s earnings announcement.

WeChat and Mobile QQ, another app, together generated gaming sales of more than 600 million yuan in the three months to Dec. 31, Tencent said, against the group’s 16.97 billion yuan in total revenue for the quarter.

“We (only) just started to monetise WeChat in the fourth quarter, so revenues won’t be too much,” Lau said.

By comparison, Line Corp’s Japanese mobile messaging app Line last month announced 2013 revenues of 34.3 billion yen ($338.38 million), making it last year’s top-earning non-gaming smartphone app..

WeChat is now worth about $64 billion, CLSA analyst Elinor Leung said this month, arguing that the expected multiple uses offer far greater earning potential than WhatsApp, which Facebook bought for $19 billion last month.


Tencent, about a third owned by South African e-commerce and media company Naspers, also plans a five-for-one share split to make the shares more accessible to small investors.

The split will result in a downward adjustment to the share price, the company said in a stock market filing, and will be effective from May 15, pending approval by current shareholders and the Hong Kong Exchange.

Tencent’s share price has more than doubled in the past year, against a 2.2 percent fall for the Hang Seng index, giving it a market capitalisation of $138.7 billion.

The 12.9 percent rise in fourth-quarter net income was in line with analysts’ expectations but was its slowest growth since the first quarter of 2012, hit by sales and marketing expenses up 39 percent from the third quarter.

Tencent said it plans further investment as WeChat evolves from a pure communications service into a multi-functional platform, with Chief Executive Pony Ma pointing to opportunities in payment services.

The company is going head to head against e-commerce giant Alibaba in mobile-based retail services and both groups recently announced plans to launch virtual credit cards using QR codes that function in a similar way to bar codes scanned by smartphones to process payments.


This foray into financial services has been attacked by China’s traditional banking sector and the central bank is considering regulations to limit the use of third-party payment systems offered by Tencent and Alibaba.

It also suspended the use of QR code payments, viewed by analysts as potentially the most attractive feature of WeChat.

“Although Tencent and Alibaba might be enemies on the surface they’re going to be united in trying to convince the banks that it should be an open market, and I think ultimately they will win,” said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.

“But it’s not going to happen tomorrow, it could take several months to work through this regulation,” he added.

Tencent said global monthly active users of WeChat rose 5.7 percent in the fourth quarter to 355 million.

Net income was 3.91 billion yuan on revenues up 40 percent at 16.97 billion yuan.

Tencent, the shares of which were down 1.82 percent at the market close, also announced that Chief Technology Officer Zhang Zhidong will step down on Thursday for personal reasons. It gave no indication of when it expects to appoint a successor. ($1 = 6.1920 Chinese Yuan) ($1 = 101.3650 Japanese Yen) (Editing by Miral Fahmy and David Goodman)

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