Article by Martin Oelbermann
New report and survey analyze the growing trend toward privatizing state-controlled gambling operationsLondon/Munich, July 18, 2005: A study completed by the consulting firm MECN and coauthors like the investment bank Sal. Oppenheim and Rob van der Gaast analyzes the privatization of state-controlled gambling businesses, one of the most relevant and controversial issues among state shareholders. The study includes the results of MECN’s privatization survey of more than 90 industry experts who offered their unique insights and assessments.
„Competition is getting tougher … we cannot compete on equal terms … we cannot ignore that the competition is here to stay“ – (Jesper Kärrbrink, CEO of the Swedish state lottery Svenska Spel)Hard-to-control Internet gambling and the intensive debate about increasing liberalization make life difficult for state-controlled operators. Although they recently won some „battles“, according to many experts business will not get any easier for them, and the value of state-controlled operators will probably decrease rather than increase in the future.
This fact combined with tight budgets might lead a growing number of state shareholders to see the regular contribution to state budgets in jeopardy and prompt them to consider privatizing their gambling operations as soon as possible. Martin Oelbermann, director of MECN, adds, „Indeed, recent and ongoing privatizations, such as those of the Greek OPAP and the UK tote, show that this is not just idle speculation.“ Furthermore 73% of experts surveyed expect that the number of privatized state lotteries will continue to increase in the near future.
Experts see some state-controlled operators‘ worth already reaching several billion USD, but Mr. Oelbermann sees even more potential „If the same valuation multiples of privatized companies, such as OPAP, were applied to state-controlled operators, some of them could be worth up to USD 17 billion – this could be quite tempting for some state shareholders.“But Mr. Oelbermann warns against acting in haste: „Little is known about the concrete advantages and disadvantages associated with the privatization of the gambling sector.“ The report provides insights into some of the following complex issues:
- Product innovations and improved cost-efficiency – Most experts believe the biggest advantages of privatization are an increase in product innovations and improved cost-efficiency. But some state-controlled operators, such as the German WestLotto and the New York Lottery, already work even more efficiently than most privatized companies; however, others are indeed far less efficient than private ones.
- Europe, the key area for privatizations – Europe in particular will undergo a wave of privatizations as 79% of the experts see the region as the key one for privatization followed by Asia/Australia and South America.
- The most valuable state-controlled operators – Of the state-gambling operators analyzed the experts considered La Française des Jeux, New York Lottery, and Norsk Tipping among the most valuable.
- Privatizations to be realized soon – According to the experts, three privatizations seem most likely to occur in the near future: the complete privatization of Casinos Austria, Asian PCSO, and the Czech Sazka (owned by various sports associations).