The Macau government says it has approved a request to extend the gaming concessions of SJM Holdings Ltd and MGM China Holdings Ltd to June 26, 2022. Such extension aligns the terms of these two gaming concessions with the other four operators in the Macau market, the licences of which are due to expire in 2022.
The existing licences of SJM Holdings and MGM China have an expiry date of March 2020. The government said it had approved a request for extension of the gaming concessions submitted by Sociedade de Jogos de Macau SA and MGM Grand Paradise SA, the Macau units of respectively SJM Holdings and MGM China that hold the gaming rights.
Each of the companies will have to pay MOP200 million (US$24.7 million) to the government by way of compensation, the government said in a press release published today, Friday.
Other conditions set by the government require the two gaming operators to join the city’s “Non-mandatory Central Provident Fund System” and to establish a labour creditor’s rights protection fund within three months from the date the new contracts are signed.
Article 13 of Law No. 16/2001 states that the term of a gaming concession should be set out in the concession contract – made respectively between each concessionaire and the Macau government – provided that the term does not exceed 20 years. It also states that if a concession is awarded for a period shorter than 20 years, the government may authorise an extension, provided it does not exceed the maximum term stated in the law.
In the case of SJM Holdings, its concession was granted for 18 years, giving leeway for the government to authorise one or more extensions up to the 20-year limit. MGM China – as a sub-concessionaire – was bound to the same licence deadline.
Ambrose So Shu Fai, chief executive of SJM Holdings, said last June that it was the firm’s intention to seek a two-year extension for its gaming concession prior to its scheduled expiry. But in early February he had told the media that the company had not yet asked the city’s government for an extension.
Same starting line
In Friday’s release, the government said the extension of the SJM Holdings and MGM China licences was in order to align the concession terms of the city’s six operators. That would “benefit” preparatory work to “launch the next public tender” to grant new concessions, it stated.
The Macau authorities said they would do “more in-depth studies” on how to improve the city’s gaming framework, which would likely entail a revision of Law No. 16/2001.
Macau gaming law states that the licences of the existing holders can be extended for a maximum of up to five years from the 20-year term. But once a gaming concession contract expires, any new concession would have to be granted via an international public tender.
A note issued on Friday by analyst Grant Govertsen of Union Gaming Securities Asia Ltd, anticipated there would be a new public tender process – as also anticipated by some experts on Macau gaming law – “at some point towards the middle of the next decade” under a different Macau administration from the current one, and that “all of the Macau Big Six” would “remain in Macau”. Such a timeline for a public tender assumes an extension to the licences of the six incumbent operators would only occur after what will now be the common expiry date of 2022 for existing rights.
“We also expect a seventh (or eighth) concession could materialise in part to clean up the service provider casino construct,” added Mr Govertsen.
That was a reference to the system of so-called service-provider agreements where third-party owners of typically small- or medium-sized hotels have been able to piggyback on the gaming licence of one of the existing concessionaires and offer casino gaming. The boss of one satellite operator called last year for local entities to be involved in any fresh public tender process for Macau rights.
The government commissioned in 2017 two studies on the possible development of Macau’s gaming sector in the period between 2020 and 2030. The studies were due to be completed within the third quarter of 2018 but their completion has been delayed, the city’s Economic Bureau confirmed to GGRAsia.
(Updated 11:22am, March 15)
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"There’s a huge amount of possibilities out there and in the case of Macau, it seems that some of these issues should be considered or we may lose the epithet of gambling capital of the world"
Macau-based lawyer and senior partner at law firm Rato, Ling, Lei and Cortés