bwin.party slams German licensing plans
Norbert Teufelberger, co-CEO of the newly merged bwin.party, says new proposals "likely to fail" as he watches his company's share price fall by more than 30% in less than two days.
Bwin.Party co-CEO Norbert Teufelberger has slammed yesterday’s proposal by the German Lander to introduce a restrictive licensing regime for sports betting from 2012, saying it “is just as likely to fail as the outgoing monopoly model in Germany”.
Teufelberger (pictured right) made the comments to the market this morning after his company’s share price fell 14% in a five-minute period yesterday afternoon on news Germany’s Lander intended to issue seven licences for sports betting to private operators based on a 16.66% turnover tax, replacing the current State Gambling Treaty banning games of chance on the internet that expires next January. At the time of writing, the company had seen nearly a third of its share price wiped off since yesterday morning.
The co-CEO of the newly merged entity, which only started trading on the London Stock Exchange last Friday, said: “A proposed tax rate of 16% on the stakes placed in sports betting would make it impossible to offer a competitive product. Furthermore, excluding poker and casino products from this licensing model will continue to drive consumers into the black market. This would mean that the proposed model would fail to meet its objectives of channeling consumer demand, offering player protection and combating fraud.”
The company this morning reiterated its intention to apply for a licence in the northern state of Schleswig-Holstein, which has submitted a licensing model for notification to the EC for the regulation of all products based on a 20% gross profit tax (GPT). eGaming Review understands that Schleswig-Holstein, which in December declared its intention to forge ahead with licensing regardless of the decision of the other Lander minister-presidents, was the only state not to issue an opinion on the proposals yesterday.
The operator also renewed its appeal to the states to implement a regulatory model that reflected the realities of the existing dot.com market. Quoting figures from gambling data business H2 Gambling Capital showing that sports betting represented only a small part of the existing dot.com market in Germany, the company argued that this would need to include poker and casino if it was not to repeat the failures in France. There a 7.5% turnover tax on sports betting – half that currently proposed in Germany “ has been widely criticised for holding back growth of the regulated market.
“Only through such a comprehensive regulatory model will it be possible to extinguish the existing huge black market. As far as the 16 2/3 per cent tax on sports wagers is concerned, this will mean that Germany would become another example of a country that fails to deliver a successful regulatory framework for online gaming because of an uncommercial fiscal regime.”
Teufelberger said he believed the EC would, upon notification, find the regime to be non-compliant with EU law, and that the ratified proposals of the Lander contained within the forthcoming State Treaty would address this. The minister-presidents will meet again on June 9. “We trust that these proposals will undergo the necessary corrections so that the new regulations will govern the entire German gaming market in a coherent and consistent manner in line with EU law.”
Analyst James Hollins of Evolution Securities said this morning: “While we would expect the mooted legislation to be challenged by operators and the EU, the success, timing and impetus of any challenges may not be sufficient for any major change or delay in introduction of the new legislation (due at start of 2012). With this in mind, we move our recommendation from Buy to Neutral and cut our target price by 20% to 210p on Bwin.Party.”
Nick Batram of Peel Hunt however told eGR he expected party.bwin’s bottom line from Germany to remain intact until the issue of the new State Treaty’s compliance with EU law had been settled: “The worst case scenario if regulation comes in as is proposed, I would expect them to carry on trading unlicensed and take it through the courts. This could delay any major profit-before-tax impact until 2013.”