Business Irish

Tuesday 26 September 2017

State demands upfront fee for new National Lottery licence

Mark Keenan

Mark Keenan

THE Government's requirement for a large upfront sum from a new licencee for Ireland's National Lottery is "almost unique" in the global lotteries market, a spokesperson for Camelot has said.

He said such a payment would indicate that concessions will probably have to be made elsewhere in the process in order to make the Irish lottery a worthwhile proposition for any independent operator.

The Government has said a new licencee will be required to pay a large upfront sum -- understood to be in the range of €400m to €600m.

"In the history of lotteries, an upfront payment on a large scale has only been made in one case -- that of the lottery in New South Wales in Australia," said the Camelot spokesperson.

As the holder of the British national lottery franchise and consultant to the Californian state lottery, Camelot is among those in the running for the forthcoming selection process to determine who will run Ireland's national lottery for the next 20 years. An Post is also interested and the Australia-based Tatts group is also reported to be in the race.

Tatts paid AUS$850m (€723m) for the New South Wales lottery in 2010. Tatt's shares tumbled in the aftermath of the acquisition, amidst concerns that it had overpaid.

However, in order to seal the deal with Tatts, the state of New South Wales had to extend the operation licence for a period of 40 years, twice the 20-year term being mooted here in Ireland and 10 years longer than the term New South Wales originally intended for its lottery.

Attractive

The Camelot spokesperson said: "Under this model (the New South Wales example), a government structures its lottery in a way so that, in return for the upfront payment, the operator has a longer and commercially attractive licence."

However, the precedent set by the Australian case seems to suggest that the Irish Government may have to offer a longer term than 20 years to raise the money it requires -- particularly if that sum is in the range already reported.

With a population of 7.3 million, New South Wales also has a population which is 40pc larger than Ireland's.

However, there are a number of factors to be considered when it comes to placing a value on the Irish licence. On the negative side, the Irish economy has been in a consumer downturn, which usually leads to less tickets being sold. On the plus side, the Irish national lottery should have room for substantial growth online -- it currently earns just 3pc of revenue online compared with up to 15pc in other countries.

The €400m to €600m figure being unofficially mooted for the Irish lottery suggests that the Government has tied the sale of the rights to funding the long-awaited National Children's Hospital, which will cost an estimated €600m.

The slice of the lottery money earmarked for "good causes" is set to remain at 30.5pc, about average by world standards, and insiders say that prize payouts should not be lowered if Ireland's lottery model is to remain attractive to consumers.

Independent advisers are currently being appointed by the Department of Public Expenditure and Reform with a view to determining the parameters of the package which will be on offer to licencees. The tendering process for the sale is due to start in October and to be completed by early next year.

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