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UPDATE 3-Tencent Q1 profit rises 65% as online gaming revenue climbs

(Adds executive comments and contexts)

HONG KONG, May 20 (Reuters) - Chinese gaming and social media giant Tencent Holdings Ltd reported a forecast-beating 65% rise in quarterly profit on Thursday, while management reiterated the company’s focus on compliance as China steps up scrutiny on tech giants.

Tencent, the world’s largest gaming firm by revenue, booked profit of 47.77 billion yuan ($7.42 billion) for the three months through March, higher than the average analyst estimates published by Refinitiv of 35.45 billion yuan.

The results come as Chinese regulators have stepped up an anti-trust clampdown on internet giants, and have already penalised Tencent rival Alibaba $2.75 billion.

Reuters reported last month that Tencent was told by Chinese anti-trust regulators to pay a fine that could exceed 10 billion yuan, give up exclusive music rights, and sell some of its music assets.

Tencent, along with Alibaba affiliate Ant Group, is also facing regulator scrutiny of its non-bank payment business.

Addressing a question on general regulatory compliance, Tencent president Martin Lau said the company is very focused on compliance and risk management, and very self-restrained in terms of the size of non-payment financial products.

“When we look into internal review, and when we look... to make sure that we are compliant with the spirit of regulators, it’s actually relatively manageable,” said Lau.

Tencent is also facing mounting competition from ByteDance, the owner of TikTok, and the similar short-video platform Douyin, which have made sizeable inroads into the video games business.

Tencent also said on Thursday the company is investing in business services, games and short-form video content.

Tencent, which gets 32% of its revenue from video games, unveiled more than 60 new titles at its annual video gaming conference last week. It is looking to launch a mobile version of its League of Legends game, and also a Pokemon game in partnership with Nintendo later this year.

Revenue rose 25% to 135.3 billion yuan, versus market expectations of 134.39 billion yuan.

Tencent said revenue from online games grew by 17%.

$1 = 6.4355 Chinese yuan renminbi Reporting by Pei Li; Editing by Jan Harvey, Christian Schmollinger, Kim Coghill, Alexandra Hudson

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