In the coming days, the Undersecretariat for Partnerships will make available on its website the minutes with all the clarifications of the questions that were made orally at the public hearing by the interested parties who sent their comments in a specific form for the virtual event.
Arthur Mundim, technical advisor to the Undersecretariat for Partnerships, highlighted that 11 studies were received from companies interested in contributing to the development of lottery activities in Sao Paulo, which include lotteries with numerical predictions, passive lottery, specific prediction, instant lottery and fixed-quota bets.
The bidding will include the concession for the exploitation of lottery services covering the creation, distribution and commercialization of products as well as the implementation of an online platform for the commercialization of the lotteries to be created.
Among the points highlighted by Mundim, it was highlighted the issue of the requirement of minimum proven experience both in the operation in physical points and POS's and in the virtual sale of lotteries.
The operation will be carried out on an exclusive basis, which generated the main manifestations contrary to the format defined by the government of the State of Sao Paulo. Another point of disagreement was the fact that there will be no obligation for the exclusive concessionaire to operate all the proposed modalities, but those that maximize exploration and bring better results to the State.
The concession period will be 20 years from the signing of the Term of Grant and the start of commercialization of lottery products must take place between 6 and 7 months after signing.
The contract provides, in addition to the management and operation plans and the compliance plan, a specific one on responsible gambling, which should include, on the part of the company that wins the bid, minimum rules for responsible practices in the commercialization of lottery products and practices to combat ludopathy.
Regarding physical points, the Public Notice will require at least one dedicated point of sale in the city of Sao Paulo, and the concessionaire will be responsible for managing the distribution area in a way that best understands it.
The estimated value of the contract is R$ 1.09 billion (US$ 203m) and represents the result of the sum of the planned investments and the minimum expected grant.
Initially, the following minimum payouts were defined for the lottery modalities:
Numerical prediction - 45%
Specific prognosis - 50%
Sports prognosis - 55%
Passive lottery - 60%
Instant lottery – 65%
Fixed odds betting – 70%
Considering the payouts above, the economic-financial modeling predicts a collection of R$ 14.1 billion (US$ 2.6bln) for the period of 20 years.
At the hearing, Mundim indicated that the forecast is that the bidding documents will be published on February 25, so that it will take place on March 29.
During the period of demonstrations, Amilton Noble, director of Hebara, a company with 30 years of experience in the lottery market in Rio de Janeiro, saluted the state of Sao Paulo for starting the implementation of a state lottery. “But I can't help but criticize the short space for us to express ourselves in the face of such an important process,” he said.
He then highlighted two issues. “We have already made a strong criticism against the exclusivity model. The Sao Paulo market is very large and the exclusivity model is not the best choice,” he said.
In addition, he stated that “payouts are modest and it was not clear the percentage to be allocated to the state, something absolutely important for us to close the accounts. Especially in sports betting, the 70% payout is impossible to practice considering that the big players and competitors will operate with a payout of 80% to 90%, a worldwide practice. Establishing a minimum of 70% is ok, but there should be flexibility to increase it.”
Finally, he spoke about his surprise regarding the revenue forecast. “In a market like Sao Paulo, predicting a collection of R$ 14 billion in 20 years is unthinkable. Only the CEF bets, the Sao Paulo market plays approximately R$ 6 billion per year. The shyness of this number surprises us. The Sao Paulo market, for 20 years, is over R$150 to 200 billion,” he said.
Continuing the hearing, Mundim gave the floor to Magno José, from Brazil’s Legal Gaming Institute (IJL). He stated that the exclusivity defined by the government of Sao Paulo is justified for the modalities of predictions, “but for sports betting it is inappropriate. All over the world, sports betting is practiced in a competitive environment. If the government of Sao Paulo adopts a monopoly in the area of betting, it runs the risk of being unsuccessful, especially with the payout that is being established. From the moment the federal government is finalizing this operation and it will be competitive, the operators will be able to work throughout the country, including Sao Paulo. This payout with the monopoly is perhaps extremely damaging to the state of Sao Paulo,” he said.
Flávio Maciel, from Social Solutions, asked about how the State will deal with the issue of inspection and control of the gray market, as well as offshore operators and operators of the jogo do bicho.
André Luiz Mascarenhas Bergholz, from Espaço Virtual, says that there is a movement across the country in the search for lotteries by municipalities “and in the presentation we have just seen, the state of Sao Paulo attributes this risk to the concessionaire. It is too big a risk to be assumed exclusively by the concessionaire. Therefore, it is worth asking: how is the State considering dealing with this risk in relation to the institution of municipal lotteries?”
Kleber Luís Zanchim, from BRLot, reinforced that “when we talk about lottery, we talk about technology and it has no borders. Proof of this are the sports betting sites that operate all over the planet. Therefore, for an operator, exclusivity does not add value, as it will face competition from a multitude of platforms, in addition to a very powerful competitor, Caixa Econômica Federal, which further reduces the relevance of exclusivity. And as already mentioned, the regulation of sports betting across the country is under discussion at the federal level. This creates uncertainty about the grant backing, even more the risk being allocated to the concessionaire,” he commented.
For him, “as the most qualified operators are able to compete with an eventual exclusive operator disputing the betting distribution channels, it may be uninteresting to participate in a bidding in Sao Paulo having to pay an eventual grant. It might be better to save this resource and invest to actually compete hard against this exclusive concessionaire.”
Roberto Quatrini, from IGT, commented that it is important for the printing process to also be certified, in the case of printing outsourcing. In addition, he asked the government whether the minimum payout should be respected annually or throughout the concession period. For him, “sports betting is not a lottery and in my opinion it should have a plurality of operators.”
Jun Makuta, from Tozzini Freire Advogados, pointed out as a doubt and concern the fact that “the lottery modalities to be explored by the concessionaire are of his choice, it may happen that he deliberately chooses not to explore certain games and this ends up preventing the entry of other players in the market to explore a certain modality. This risk must be evaluated by the government of Sao Paulo,” he said.
At the end of the hearing, Arthur Mundim presented the final clarifications of the meeting. “Everything will be answered before we publish the final documentation for the concession,” he promised.
Regarding the exclusivity model, Mundim stated that it is a stance that took into account the issue of scale and regulatory effectiveness, as well as “it will help to neutralize possible competitors at the federal level in the operation in the State of Sao Paulo,” he said.
Regarding the payouts, the advisor highlighted that they were identified in the document as minimum payouts and that they must be respected throughout the concession period, by drawing lots. He recalled that there is a payout considered as “practiced”, which is greater than the minimum and which is indicated in the documents until then delivered to the market.
The mandatory exploitation of all lottery modalities was not considered by the State, which understood that the concessionaire will seek to maximize the exploitation of products, "which will represent a better result for the State of Sao Paulo."
Other points raised during the hearing and received by the commission will be clarified in the coming days and will be available to interested parties on the website of the Secretariat of Partnerships of the State of Sao Paulo.
Source: GMB
