SecProbe.io

CORRESP
1
filename1.htm

    July 26, 2023

    Division of Corporation Finance

U.S. Securities & Exchange Commission

100 F Street, NE

Washington, D.C. 20549

    Re:

    Tencent Music Entertainment Group

Form 20-F for the Year Ended December 31, 2022

    Filed April 25, 2023

File No. 001-38751

    Attn:
    Division of Corporation Finance

Office of Technology

VIA EDGAR

Dear Kathryn Jacobson, Robert Littlepage, Tyler
Howes and Daniel Morris:

This letter sets forth the responses of Tencent
Music Entertainment Group (the “Company”) to the comments (the “Comments”) the Company received
from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) in a letter
dated June 21, 2023. For the Staff’s convenience, we have included herein the Comments in bold, and the Company’s responses
are set forth immediately below the Comments.

General Note to the Staff:

The Company respectfully submits in this letter
its proposed amendments to the disclosures contained in the Company’s annual report on Form 20-F for the fiscal year ended December
31, 2022 filed with the Commission on April 25, 2023 (the “2022 Annual Report”) (with deletions shown as strike-through
and additions underlined). The Company undertakes to include the proposed disclosures substantially as set forth below in its annual report
on Form 20-F for the fiscal year ending December 31, 2023 (the “2023 Annual Report”), subject to the Staff’s
further review and comment with appropriate revisions and updates to reflect the Company’s circumstances at the time when it files
the 2023 Annual Report. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the
2022 Form 20-F.

Form 20-F for the Year Ended December 31, 2022

Item 3. Key Information

Condensed Consolidating Schedule, page 4

1. Please recharacterize the WFOE’s economic interest in the
VIE as a receivable on the summary balance sheets starting on page 6. We understand that the WFOE does not hold any equity in the VIE.
Clarify the Total Equity Section of the summary balance sheets so that capital contributions to the PRC subsidiaries and loans to the
VIEs are transparent. Also, revise the summary cash flow data on page 8 to include separate line items and annotations for capital contributions
to PRC subsidiaries and loans and principal repayments to/ from the VIEs.

The Company respectfully advises the Staff that
it proposes to revise the referenced disclosures in its 2023 Annual Report in the summary balance sheets to change “Investment in
VIEs” into “Net assets of VIEs” to better reflect the WFOE’s economic interest in the VIEs. Furthermore, the Company
respectfully advises the Staff that Total Equity Section of the summary balance sheets does not include any loans to the VIEs, as any
outstanding balances due from/to the VIEs have been disclosed as “Amounts due from subsidiaries and VIEs” and “Amounts
due to subsidiaries and VIEs.” The Total Equity Section mainly includes the aforementioned Net assets of VIEs and the Investments
in subsidiaries disclosed in the summary balance sheets. With regards to the summary cash flow data, the Company respectfully advises
the Staff that it proposes to revise the referenced disclosures as follows (with additions underlined), to include separate line items
for capital contributions to PRC subsidiaries and loans and principal repayments to/from the VIEs, if any, in its 2023 Annual Report,
with the relevant factual disclosures to be updated as necessary.

    1

Condensed
Consolidating Schedule (extracted)

    For the Year
    Ended December, 2021

    Parent

    VIE and its
    consolidated subsidiaries

    WOFEs

    Other subsidiaries

    Eliminating
    adjustments

    Consolidated
    totals

    (RMB  in
    millions)

    Net cash inflow/(outflow) from operating activities

      69

     (671)

     5,628

     213

     -

    5,239

    Include: Intercompany services fees

     -

     (17,743)

      17,743

     -

     -
     e
     -

    Net cash (outflow)/inflow from investing activities

    (1,064)

    (3,554)

      (5,005)

    95

     3,529

    (5,999)

    Include: Intercompany advances

     -

     -

      (3,636)

    (5)

     3,641
     f
     -

     Loans repayments from VIEs
    to WOFEs

     -

     -

      112

     -

      (112)
     f
     -

    Net cash (outflow)/inflow from financing activities

    (3,571)

      3,462

      (71)

    (1)

      (3,529)

    (3,710)

    Include: Intercompany advances

     -

      3,636

     5

     -

      (3,641)
     f
     -

     Loans repayments from VIEs
    to WOFEs

     -

     (112)

     -

     -

      112
     f
     -

    Net (decrease)/increase in cash
    and cash equivalents
    (4,566)

     (763)

      552

     307

     -

    (4,470)

    Cash and cash equivalents, beginning of the
    year

      5,686

      1,397

     3,952

    93

     -

    11,128

    Exchange differences on cash and cash equivalents

    (59)

    -

      -

    (8)

     -

    (67)

    Cash and cash equivalents, end of the year

      1,061

    634

     4,504

     392

     -

    6,591

    For the Year
    Ended December, 2022

    Parent

    VIE and its
    consolidated subsidiaries

    WOFEs

    Other subsidiaries

    Eliminating
    adjustments

    Consolidated
    totals

    (RMB  in
    millions)

    Net cash inflow/(outflow) from operating activities

      59

    (17)

     7,306

     133

     -

    7,481

    Include: Intercompany services fees

     -

     (16,415)

      16,415

     -

     -
     e
     -

    Net cash inflow/(outflow) from investing activities

      2,639

     (379)

      (3,819)

     (1,726)

     1,839

    (1,446)

    Include: Intercompany advances

    (1,388)

     -

    (364)

     (56)

     1,808
     f
     -

     Loans from WOFEs to VIEs

     -

     -

      (31)

     -

     31
     f
     -

    Net cash (outflow)/inflow from financing activities

    (3,162)

    252

      (58)

    1,388

      (1,839)

    (3,419)

    Include: Intercompany advances

     -

    364

     56

    1,388

      (1,808)
     f
     -

     Loans from WOFEs to VIEs

     -

      31

     -

     -

      (31)
     f
     -

    Net (decrease)/increase in cash
    and cash equivalents
     (464)

     (144)

     3,429

      (205)

     -

    2,616

    Cash and cash equivalents, beginning of the
    year

      1,061

    634

     4,504

     392

     -

    6,591

    Exchange differences on cash and cash equivalents

    294

    -

      -

    54

     -

    348

    Cash and cash equivalents, end of the year

    891

    490

     7,933

     241

     -

    9,555

    For the eliminating adjustments:

    e)
    The cash flows which have occurred between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries represents the intercompany services fees which were eliminated at the consolidation level. In 2021 and 2022, the VIEs transferred RMB17,743 million and RMB16,415 million (US$2,380 million), respectively, to our PRC subsidiaries as Service Charge, which were eliminated at the consolidated level.

    f)
    Represents the elimination of intercompany advances and loans between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries. The intecompany advances from WOFEs to the VIEs, which were eliminated at consolidated level, amounted to RMB3,636 million and RMB364 million (US$38 million), for the years ended December 31, 2021 and 2022, respectively. The loans payments from/to WOFEs to/from VIEs, which were elimiated at consolidated level, amounted to RMB 112 million and RMB31 million (US$19 million), for the years ended December 31, 2021 and 2022, respectively.

Item 5. Operating and Financial Review and Prospects

5.A. Operating Results, page 109

2. In an overview, please briefly discuss how the Foreign Investment
Law could materially affect, directly or indirectly, your operations, organizational structures, activities, and how it would cause reported
financial information not to be necessarily indicative of future operating results or future financial condition, should the VIE contractual
arrangements be deemed as a form of foreign investment. Refer to Instruction 9 to Item 303(b) of Regulation S-K.

In response to the Staff’s Comments, the Company respectfully
advises the Staff that it proposes to add the paragraph below to the referenced disclosures (underneath the paragraph “Unfavorable
changes in any of these general conditions could negatively affect demand for our services…”) as follows in future filings
of its annual report on Form 20-F (with additions underlined) for as long as the VIE contractual arrangements exist.

“Tencent Music Entertainment Group is a Cayman Islands
holding company. It does not engage in operations itself but rather conducts its operations through its PRC subsidiaries, as well as
the VIEs through certain contractual arrangements entered into with the VIEs. Though the Foreign Investment Law does not
explicitly classify such contractual arrangements as a form of foreign investment, the definition of “foreign
investment” under such law is relatively broad and contains a catch-all provision so that foreign investment includes
“investments made by foreign investors in China through other means defined by other laws or administrative regulations or
provisions promulgated by the State Council,” without further elaboration on the meaning of “other means.”
Uncertainty remains on how these rules will be interpreted and implemented and whether the Group’s corporate structure could
be found to violate current foreign investment rules as we adopt the contractual arrangements with the VIEs to operate certain
businesses in which foreign investors are prohibited from or restricted in investing. Furthermore, if future legislations mandate
further actions to be taken by companies with respect to existing contractual arrangements, we may face uncertainties as to whether
we can complete such actions in a timely manner, or at all. If we fail to take appropriate and timely measures to comply with any of
these or similar regulatory compliance requirements, the Group’s current corporate structure, corporate governance and
business operations, as well as the Group’s ability to consolidate the VIEs’ results in the Group’s consolidated
financial statements, could be materially and adversely affected. For more details, see “Item 3. Key Information—D. Risk
Factors— Risks Related to the Group’s Corporate Structure— Uncertainties remain as to the interpretation and
implementation of the Foreign Investment Law of the PRC and how it may impact the viability of the Group’s current corporate
structure, corporate governance and business operations.”

    2

Year Ended December 31, 2022 Compared to Year Ended December
31, 2021

Revenues, page 116

3. To the extent material, please describe qualitatively and quantitatively
the underlying reasons for changes among offsetting items within revenues from online music services, including advertising revenue among
others. Refer to Item 303(b) of Regulation S-K.

In response to the Staff’s Comments, the Company respectfully
advises the Staff that it proposes to revise the referenced disclosures as follows in its annual report on Form 20-F for the fiscal year
ending December 31, 2023 (with deletions shown as strike-through and additions underlined). Furthermore, the Company respectfully advises
the Staff that the referenced disclosures primarily focus on trends in music subscriptions due to their significant contributions to the
Company’s online music services revenues and total revenues. It is expected that music subscriptions will continue to constitute
the substantial majority of the Company’s online music services revenues in the foreseeable future. The Company also intends to
update the disclosures to quantify the decrease in content licensing and distribution revenue between 2021 and 2022 as it was the largest
offsetting item to the revenue increase.

“Online music services

Our revenues generated from
online music services increased by 8.9% from RMB11,467 million in 2021 to RMB12,483 million (US$1,810 million) in 2022, mainly driven
by strong growth an increase in music subscription revenues of RMB1,366 million (US$198 million) in 2022,
supplemented by growth in revenues from long-form audio, partially offset by decreases in content licensing and distribution revenues
of RMB424 million (US$61 million) and decrease in advertising revenues. Nonetheless, revenues from advertising continued to recover
quarter-over-quarter in 2022, as ad-supported mode achieved strong growth. See “Item 4. Information on the Company—4.B. Business
Overview—How We Generate Revenues—Advertising Services.” The decrease in content licensing and distribution revenues
was mainly due to the restructuring of the agreements with certain music labels from whom we licensed music content. The decrease in advertising
revenues were mainly due to regulatory restrictions on advertising format and downturn in market and economic conditions amid the resurgence
of the COVID-19 in some major cities in China.”

Non-IFRS Financial Measure, page 118

4. We note that you reported non-IFRS measures, such as Earnings
per share for Class A and Class B ordinary shares (Non-IFRS financial measure) and Earnings per ADS (Non-IFRS financial measure) hereunder
and the corresponding IFRS measures elsewhere in the filing. In future filings, please present the comparable IFRS measures wherever non-IFRS
measures are reported. Refer to Item 10(e)(1)(i)(A) of Regulation S-K.

The Company respectfully undertakes that, to the
extent it discloses non-IFRS financial measures in future filings of its annual report on Form 20-F, including (i) earnings per share
for Class A and Class B ordinary shares and (ii) earnings per ADS, it will also present their respective comparable IFRS measures with
equal prominence.

5. Please clarify if the adjustment for amortization to calculate
Adjusted Profit relates only to identifiable intangible assets resulting from acquisitions. Additionally, please provide additional context
as to the nature of prepayments for music content and disclose why you are including the related amortization as a non-IFRS adjustment.

The
Company respectfully advises the Staff that the adjustment for amortization to calculate Adjusted Profit relates to the identifiable
assets resulting from business acquisitions, including those intangible assets like domain name, trademark, copyrights etc. and fair
value adjustment on music content from purchase price allocation. The Company proposes to revise the referenced disclosures as follows
in its 2023 Annual Report (with deletions shown as strike-through and additions underlined). Furthermore, the Company respectfully advises
the Staff that the music content resulting from business acquisitions represents the signed contracts for the rights to access to the
music content for which the amount was amortized over the contract period. The Company has considered the amortization related to the
fair value adjustment on music content resulting from purchase price allocation as non-IFRS adjustment as they arose from business acquisition
or combination which were not the ordinary course of business of the Company.

    3

“Notes: (1) Represents the amortization
of identifiable assets, including intangible assets such as domain name, trademark, copyrights, supplier resources, corporate customer
relationships and non-compete agreement etc., and fair value adjustment on prepayments for music content (i.e.,
signed contracts obtained for the rights to access to the music contents for which the amount was amortized over the contract period),
resulting from business acquisitions or combination.”

Item 16I. Disclosure Regarding Foreign Jurisdictions
that Prev