With the measure to approve the process for the tendering if the six casino concessions in Macau, which expire in June of this year, finally written, members of the Executive Council, which advised Chief Executive Ho Iat Seng, filled in much of the details at a press conference in Macau last week. And it’s almost status quo, according to most observers.
The bill now goes to the Legislative Assembly, which can change, approve or otherwise impact the final shape of the measure. The council understands that process could take some time and has built in provisions for extending the terms of the existing concessions until a bill is passed.
Spokesman André Cheong Weng Chon eased concerns of the financial community when he said that there would be six concessions—scraping the sub-concession system that was instituted when the original three concessions were compromised—and that the term of the next concessions would last 10 years. The previous term was 20 years. While this calmed fears that the concessions would be increased or even worse, decreased, Cheong didn’t say whether the current concession holders would be renewed or if their applications will be given more attention than non-concession holders.
The original three concessions granted in 2002—Galaxy Entertainment Group Ltd, SJM Holdings Ltd and Wynn Macau Ltd.—were supposed to be the only players in the market. But a dispute between partners Galaxy and Las Vegas Sands, forced legislators to give each of the original licensees sub-concessions, which, in addition to Las Vegas Sands, brought MGM Grand and a partnership between Melco and Crown Resorts into the field. Melco later bought out Crown.
Under the proposed legislation, all concessions we be on equal footing.
Taxes were another concern for the operators, but Cheong says there is no provision to change the existing 35 percent tax rate, or any fees that raise the total revenue contribution to the city to 39 percent.
Previous suggestions that Macau would appoint “delegates” to oversee gaming operations were not included in the bill. Cheong said that there would be other channels of supervision to ensure that operators are following all the rules and regulations.
Current regulations require that a Macau permanent resident own 10 percent of the concessionaire and the new bill ups that percentage to 15. In addition some nebulous language requiring a commitment to “national security,” a commitment to economic diversification for Macau, and sustainable development was fairly confusing. Cheong said those conditions would all be considered by any company that applied, and if applicants filled in all those requirements they would be welcomed.
Meanwhile, Macau’s “satellite” casinos—mostly controlled by SJM—have three years to establish a closer relationship with their parent concessionaire. While they operate under the auspices of the concessionaire, they are largely owned by investors and pay a fee to the concessionaire. Cheong admits that they exist in a kind of legal limbo, and they need to be sanctioned.
Regulations for the troubling VIP section will get much tougher, as well. Special VIP rooms operated outside the oversight of the rest of the casino will be banned.
And a key element of the junket business—splitting the losses of the players—is also verboten.
“There will be an explicit ban made against the sharing of casino revenue—in any form or agreement—between VIP gaming promoters and the concessionaires,” Cheong said.
Since many of the existing concessionaires have already terminated junket agreements, this provision may not have much impact.
But the biggest question remaining is how the existing concessionaires will be considered. There are many strong companies that would love to become a Macau operator—Hard Rock, Genting, even Caesars which was left on the outside looking in during the 2002 process. That’s the wild card in the tender process.