Gambling with ticket prices?Turkey’s lottery system privatized amidst heated debate

Published July 16th, 2014 - 06:46 GMT

A tender to operate Turkey's national lottery, Milli Piyango, for 10 years was finalized on Tuesday amid criticisms that the final price was below the real market value.

Turkish consortium Net Şans-Hitay -- with US-based partner Scientific Games -- won a tender to operate Turkey's national lottery for 10 years for $2.76 billion on Tuesday. Net Şans Holding owns separate gaming businesses, and Hitay is the owner of Turkey's first online gambling platform, Observers, however, have criticized the privatization for underestimating the value of the lottery system, which earned the state coffers nearly TL 1 billion in 2012.

Market experts have said more revenue would have poured into the state coffers in the following 10 years than the amount earned by privatization. Sales revenues for Milli Piyango increased to TL 2.28 billion in 2012 from TL 1.53 billion in 2007. Nearly TL 1 billion of the sales revenue in 2012 went to the state. If Milli Piyango were not privatized, the money that the state would earn from sales in the following 10 years has been estimated at TL 10 billion ($4.58 billion), according to current figures.

Others have said the state could maximize its return from the revenue-generating lottery system through better management provided by private companies. Net-Hitay will receive a 25 percent share of the annual lottery revenue.

Overall, revenue from all types of games of chance, including Milli Piyango, horse racing and football, grew to TL 11.3 billion ($5.4 billion) in 2012 from TL 7.24 billion in 2010 in Turkey, according to data from the Privatization Administration (ÖİB). The share of Milli Piyango in the total revenue from games of chance was 20 percent in 2012 with TL 2.2 billion, while Spor Toto had the highest share, 54 percent, with TL 6.1 billion, and Türkiye Jokey Kulübü, the horse racing betting system, had a 26 percent share with TL 2.9 billion.

Turkey attracted several billion dollars in privatization revenues last year driven by sell-offs in the energy sector and is now trying to focus on more profitable sales after some tender revenues came in below expectations. Other cash-strapped countries have chosen different ways of dealing with the lottery system. One of these is Russia, which nationalized its lottery system in 2012 to raise funds for sports investments as well as for the World Cup 2018 preparations.

The bid from Net Şans-Hitay must now receive final approval from Turkey's privatization and competition boards as well as from a high court, the ÖİB said on Tuesday. The Net-Şans consortium beat offers from two rival consortia: one composed of Czech investment groups KKCG and Emma Capital with Italian gaming company GTECH S.p.A., the other Turkey's ERG-Ahlatçı consortium. The winning companies will also have the right to add new games of chance to the market. The diversification of such games is anticipated to attract even more customers, thus boosting the gaming sector. This will also give the consortium a chance to recover the money spent in the tender.

With the addition of new games, the lottery system is expected to pay off in a short time. The winner will also have the right to hold the lottery every weekday. Previously it had been held only four days a week. The government had to abandon an attempt to privatize Milli Piyango earlier in January of this year amid political tension at home. Separately, in 2009, Turkey scrapped a tender to privatize the national lottery as a whole after the two bidders failed to meet the $1.6 billion minimum price and later opted instead to sell licenses for games operated by the lottery.

Due to expectations that it would win the tender, Net Holding shares traded on Borsa İstanbul (BİST) enjoyed this year's best gain, with the value of shares jumping from TL 2.42 on July 8 to TL 2.70 on Monday. The shares retreated, following the completion of the tender, to 2.63 on Wednesday.

Milli Piyango has 23 representative offices across Turkey, and there are 15,356 sales offices in the country, according to the ÖİB.

There are six online gambling sites that are also authorized to sell Milli Piyango tickets. These sites are: Bilyoner İnteraktif Hizmetler A.Ş., D Elektronik Şans Oyunları A.Ş., Nimet Abla Talih ve Bahis Oyunları A.Ş., Misli Elektronik Şans Oyunları Yayıncılık A.Ş., NTV E Elektronik Bahis Oyunları A.Ş. and S Şans Oyunları A.Ş.

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