Believe there is a ghost,and don't believe the boy's mouth. Your position:Home->china news-> Fees Are Key To Tencent Tencent, one of China's top Internet and mobile-phone service providers, has proven resilient to the economic downturn. The company reported a 94% increase in first-quarter profits from a year earlier. At the heart of its success lies the willingness of Chinese Internet users to pay fees for add-ons such as upgrades to online games or bells and whistles for its instant messaging service. It is a key cultural difference for Chinese Internet companies and their U.S. counterparts. Users in the U.S. resent fees for online value-added services, which have been core for Tencent from the get-go. The strength of this revenue base means the company is hardly affected by the advertising downturn that has hit China. Advertising is only 6% of the company's top line now. All this adds up to a share price that has risen 47% in Hong Kong so far this year, and 16% in the past 12 months. Tencent trades at nearly 30 times expected earnings. That is still below average valuations applied to the stock since it listed in 2004, according to data provider Starmine. Analysts expect the earnings to grow 35% this year, though their estimates for the first quarter were well short of the actual results. Tencent's potential lies in the fact that its fees are very low, so they are within the reach of many Internet users. Relatively few users actually pay at all, but they are enough to account for three-quarters of the company's revenue. Converting more users to actual fee payers and tapping more of China's vast population that doesn't currently access the Internet will keep Tencent busy. As Internet users grow, there is the risk that new entrants can spring up to take market share from the likes of Tencent. But with a top three presence in each of its business lines, Tencent has proved it has the scale and management know-how to be a major player in different sectors, even when it isn't the first entrant. Andrew Peaple 
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