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Tencent plays down US WeChat ban after results beat estimates

Shanghai

TENCENT Holdings Ltd tried to reassure investors that US President Donald Trump's ban on its WeChat messaging service may apply only to its overseas operations, suggesting the impact on the world's largest gaming corporation should be modest.

During a conference call after earnings, executives repeatedly emphasised the distinction between WeChat, which is used outside China, and Weixin, a similar service within the country. Mr Trump's executive order specifically mentioned banning the former because of alleged risks to American national security.

"The executive order is focused on WeChat in the United States and not other businesses in the US," said chief financial officer John Lo. "We are in the process of seeking further clarification from bipartisan parties in the US."

Tencent boosted revenue at the fastest pace in two years and reported profit that beat the highest analyst estimate. Sales rose 29 per cent to 114.9 billion yuan (S$22.7 billion) in the three months ended June, while net income increased to 33.1 billion yuan.

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Heightened usage of Tencent's digital services driven by Covid-19 may boost the company's earnings in the coming quarters. The online game business could continue to expand through the year with popular new titles in the pipeline and enhanced monetisation features. Media advertising sales might remain subdued due to weak demand and delayed video content, but social-advertising growth could stay robust.

Tencent executives also fielded questions about whether American companies would be able to keep doing business with the Chinese tech giant. US companies like Starbucks Corp and Walmart Inc collaborate with Tencent in China and generate advertising and e-commerce revenue for the company. The US represents less than 2 per cent of Tencent's global revenue, executives said.

China's biggest social media company has benefited from an Internet resurgence during the Covid-19 pandemic. It won approval from Beijing to earn money from Call of Duty Mobile, the smartphone version of a long-running franchise that will underpin its gaming business, and has charted a line-up of new titles for 2020 to shore up resilient franchises Peacekeeper Elite and Honor of Kings.

The WeChat and Weixin services grew monthly active users 6.5 per cent to more than 1.2 billion as of June's end. Started in 2011 as a WhatsApp clone, the app has become deeply ingrained in Chinese life. It pioneered the all-in-one or super-app concept by embedding lite apps or mini programs - a model emulated by Alibaba Group Holding as well as Facebook Inc. BLOOMBERG

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