Wednesday, February 21, 2024

China’s Tencent Music posts declining quarterly revenue but beats estimates

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March 21 (Reuters) – Tencent Music Entertainment Group reported its fifth consecutive quarter marked by declining revenue on Tuesday but continued growth in paying users and a recovery in advertising helped it beat analysts’ estimate.

Total revenue of the company, China’s answer to Spotify (SPOT.N), stood at 7.43 billion yuan ($1.08 billion) in the fourth quarter ended Dec. 31, down 2.39% from a year prior.

However strong paid user growth helped the company, controlled by Chinese tech giant Tencent Holdings Ltd (0700.HK), land slightly above analysts’ average estimate of 7.34 billion yuan, according to Refinitiv data.

“The strong paying user and (revenue per paying user) growth were driven by more attractive member privileges such as improved sound quality, broadened sales channels, more effective promotions, optimized content quality and high-quality services,” Shirley Hu, the company’s chief financial officer, said in a call with analysts.

But, the total numbers of active users had shrunk for both Tencent Music’s music platform and its social entertainment platform. The monthly active user (MAU) number of its music platform fell to 567 million in the quarter, marking a 8% decline compared with a year ago.

Tony Yip, its chief strategy officer, attributed the decline to “the surge in COVID cases” and “(loss) of casual users amid competition” over the quarter.

Overall, by cutting cost and enhancing monetization, Tencent saw its net profit attributable to equity holders rise 114.7% to 1.15 billion yuan from a year ago.

Meanwhile, the company said it is experiencing a recovery in advertising sales on its platform, after a slowdown earlier last year as advertisers cut spending amid China’s battle with COVID-19 outbreaks.

Yip said China’s recovery from COVID would result in “a year of positive growth for the ad business”, identifying e-commerce, internet services, consumer electronics and local services as key industries where advertising appetite would grow.

($1 = 6.8745 Chinese yuan renminbi)

Reporting by Eva Mathews in Bengaluru and Josh Ye in Hong Kong; Editing by Maju Samuel and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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