Tencent executives interpret earnings: Game restrictions will not affect business.


Tencent executives interpret earnings: Game restrictions will not affect business.

In the evening of November 14, Tencent Holdings Limited (00700.HK) announced its unaudited third quarter results as of September 30, 2018. In the third quarter of 2018, Tencent's total revenue was 80.595 billion yuan, an increase of 24% over the same period last year, and the growth rate reached a new low in 13 quarters. The company's equity holders should earn 23 billion 333 million yuan, an increase of 30% over the same period last year. Non general accounting standards, the holders of equity should earn 19 billion 710 million yuan, an increase of 15% over the same period last year.

After the announcement of the financial report, Tencent chairman and CEO Ma Huateng, President Liu Chiping, Chief Strategic Officer James Michelle and CFO Luo Shuohan held a conference call to interpret the main points of the financial report and answer analysts'questions.  

The following is the main content of this conference call Q & a session.

Wendy Huang, Macquarie analyst: The company said that there are 15 new games to be approved by the regulator. Last quarter, the number was the same. In the middle of these two quarters, the company released several new games. How did these games get approved? In addition, what kind of competition is the company's small program facing? How is the commercialization? Because I have seen other companies publish products like small programs, the company also mentioned that they are starting to get advertising revenue from small programs.

James Michelle: There are several dynamic factors that have an impact on the number of unlisted games that have not yet been listed but have been licensed for commercial operations. First, as companies continue to release new games, the number of unlisted games will gradually decrease. On the other hand, we can also increase the number of unlisted games. For example, an independent game studio started developing a new game a year ago. This game has been licensed for commercial operation before. Last quarter, we reached a cooperation agreement. Tencent will release this game for Tencent. This game will also become an unreleased but already licensed game for commercial operation. Play.

Liu Chiping: Small programs are the use of innovative program architecture in the Wechat ecosystem. Tencent created this framework and is very happy that other companies have adopted it, because this means that the architecture is very valuable, and the more companies support it, the more small program developers there will be. It's very good.

At the same time, Tencent has unique advantages and ecosystems in small programs, including the number of active users per month and the frequent use of Weixin. In addition, through social recommendation, Tencent small programs can also be spread among different users. Our ecosystem is very complete, including Wechat Payment, helping small program vendors collect money, and we have developed two-dimensional codes to help off-line businesses and operators to promote their small programs. So we think that Tencent applet can best satisfy users' value appeal.

Overall, small programs are spreading very fast. At present, the commercialization of small programs is mainly game programs. However, the revenue of other small programs is also increasing. For example, many retailers are eager to have their own small programs as a sales channel. We are looking forward to the future of small programs.

Citigroup analyst Alicia Yap: How does the time limit for minor players affect the company's total game time and revenue? Another question is about the company's entry into the industrial Internet. I know that this industry change is still in its infancy. Does this mean that the company will invest a lot in the next few years? Will the profit margin of this part of the business be lower than that of the consumer Internet business?

James Michelle: Restrictions do reduce the playing time of juvenile players, but overall, we don't think it will affect the total playing time. Of course, we need to focus on further development. As for the impact of time reduction on revenue, minors do not contribute much to the company's hand games revenue. We hope that through our operation, we can avoid the impact on adult game revenue. This policy is targeted at minors and therefore will not materially affect the company's business.

Liu Chiping: The initial revenue opportunity of industrial Internet business still comes from cloud business. Tencent's cloud service has been growing very fast and its market share has been continuously increasing. The nature of cloud business determines the need for a large amount of investment, including data center and server expenditure, so as to generate recurrent revenue from cloud services.

At the same time, the profit margin of this business is relatively low, because it is only engaged in infrastructure level business, but we think these are long-term investments for future development. If new business opportunities arise over time, cloud services and industrial Internet will have new opportunities for development, including "infrastructure is ready to serve". With the transition from IaaS to PaaS and SaaS, profit margins and revenue will increase.

In addition, we believe that cooperation between companies and different industries will lead to new business models and value-added services, such as transportation industry. If we can establish customer relationship management system for automobile manufacturers and establish contacts with customers, we can obtain revenue from marketing and related value-added services, including automobile insurance. The recommended fee for the loan.

Engaging in industrial Internet business is also beneficial to the subsidiary business of the company, such as payment and advertising business, which needs overall consideration. Just as we started to engage in consumer Internet business, at first no one knows where the commercial opportunities of consumer Internet are. Tencent started by offering only a product, but We know that this product will create value for users. Over time, we have developed a variety of business opportunities. For the industrial Internet, the principle is the same. We know that this business can create value for the industry and partners, establish contacts with users, create value for users, and provide help for the upgrading of this industry. We believe that there will be business opportunities in the future.

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