CASINO

Macau publishes casino sub-license contracts to quiet protesters

TAGs: francis tam, gaming concession, las vegas sands, Macau, SJM Holdings

macau-casino-francis-tam-dicjThe government of Macau has published contracts involving the Asian gaming hub’s casino licensees after local activists raised questions about the licensees’ sub-licensing deals. The kerfuffle began earlier this week when New Macau Association president Jason Chao challenged the government’s assertion that Macau had but three casino concessionaires.

Technically, Macau does have only three concessionaires: Sociedae de Jogos de Macau (SJM), Galaxy Entertainment Group and Wynn Resorts. But these three companies have sub-concessions with MGM Resorts, Las Vegas Sands and Melco Crown Entertainment. In a 2006 communication with the Bank of Nova Scotia, Secretary for Economy and Finance Francis Tam (pictured right) reassured the nervous bankers that Sands’ subsidiary Venetian Macau S.A. would retain its right to run casinos in Macau “even in the event of the termination and extinction of the Galaxy Casino S.A. concession contract.” Chao cited this memo as proof that Macau had “six autonomous and independent concessionaires.”

Linguistic hairsplitting aside, Chao’s argument is that Macau legislators unfairly sold the public on a market liberalization based on only three casino licensees. “You cannot just create new sub-concessions out of the original plan, particularly without public knowledge.” Chao suggested the Public Prosecutor’s Office might like to investigate this “abuse of power” by Tam and former gov’t CEO Edmund Ho.

Chao also suggested there were “huge interests hidden” in the sub-concession Wynn inked with Melco Crown, for which Wynn received $900m. (By comparison, SJM charged MGM China a mere $200m… Steve Wynn: 1. Stanley Ho: 0.) Chao said such deals were “reinforcing the public perception that principal officials are highly corrupt.”

TAM SHOCKED … SHOCKED! BY ALLEGATIONS
In response to Chao’s claims, the Gaming Inspection and Coordination Bureau (DICJ) told the Macau Daily Times that the sub-concession deal between Galaxy and Sands had been “duly authorized.” The DICJ also stood behind the idea that a sub-concessionaire’s fate wasn’t necessarily conditional on the status of the main concessionaire’s license, citing the possibility of a concessionaire going bankrupt independent of any activity by the sub-concessionaire.

On Wednesday, Tam clarified that sub-concessionaires wouldn’t be allowed to morph into concessionaires, and thus sub-concessionaires would always lack perks such as the ability to discuss their contracts with government officials. Despite this second-class status, Tam insisted that sub-concessionaires remained accountable to the government. In a bid to placate Chao, Tam directed the public to visit the DICJ’s website and view the sub-concession contracts, which Tam insists contain the same terms and conditions as the original concession deals.

Tam strongly denied there’d been any “secret assurances or agreements” between the government and its gaming operators. Tam then suggested that the process of reviewing Macau’s gaming contracts might commence in 2015. SJM’s concession and its MGM sub-concession are up for renewal in 2020, with the other four companies coming due two years later. There’s a lot to be discussed, including whether the term length of renewals should be cut to five years. There’s also the tantalizing possibility that the concessions in the planet’s hottest casino market might once more be put up for tender, which could result in the brick-and-mortar casino equivalent of Thunderdome (featuring Sheldon Adelson as Master). Sadly, Union Gaming Research believes it “exceedingly unlikely” that the licenses will be put up for public auction. Spoilsports.

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