Inside Asian Gaming

INSIDE ASIAN GAMING | February 2012 34 on 31st December 2001, and a set of new licences for multiple operators were issued in February 2002, one of the successful applicants—STDM’ssuccessor,SJM—wasthe only one with inherited casino infrastructure capable of carrying on a casino business. Thus, it had no market competition in the territory until May 2004, when LVS opened Sands Macao. In other words, it effectively got a two-year extension on Dr Ho’s old monopoly. Whether MGM China should face the double jeopardy of an earlier-than- market-norm redemption on its gaming sub-concession (because of its tie-up with SJM) and in addition low priority in the Cotai permissions pecking order is a moot point. Were MGM China’s Cotai project permission to be delayed to within seven years of the expiry date of its sub-concession (i.e. the end of 2013), the company might have real problems raising debt for construction costs. Assuming a two-year construction timetable—taking the resort opening date to the end of 2015—would-be lenders might fret that anything lower than a 20% annual return on investment from resort operations might result in them not getting all their money back. “In our opinion, MGM China can make at least three arguments as to why they should be included as one of the two operators to receive approval for a Cotai project this year,” said Union Gaming Research. “First, the company has the smallest amount of gaming supply inmarket; second, the company has no exposure to Cotai; and third, the company’s concession expires in 2020, which is two years prior to four of the other five operators,” said Union Gaming Research in its note. “Like MGM China, we believe SJM can also make at least three arguments for 2012 approval of their Cotai land application. First, the company has no Cotai exposure; second, the company submitted its Cotai application before MGM China; and third, the company’s concession also expires in 2020, which is two years prior to four of the other five operators. “Again, we can think of at least three arguments that Wynn Macau can make as to why they should also receive Cotai land approval this year,” added Union Gaming. “First, the company has no Cotai exposure; second, the company submitted its Cotai application before any other operator; and third, the company has the second smallest amount of gaming supply in the market.” Ultimately, the whole land permissions and building permissions process is being driven not by the competence or even fair- mindedness of Macau public servants but by the politics of China and the politics of managing the gaming industry. Given that overriding fact, some lyrics by the Scottish pop rock guitar band Del Amitri come to mind when describing where the gaming industry stands in the pecking order: “Always the last to know/ How you’re feeling/ The last to know/ Where you are/ The last to know/ If you’re happy now/ Or if he’s pleadingwith you, like I pleadedwith you/ If you go, don’t let me be the last to know/ Don’t let me be the last to know.” The Cotai contenders: SteveWynn of Wynn Resorts, Ambrose So of SJM and Pansy Ho of MGM China Pride of place?—MGM has grounds for special treatment on Cotai Macau Policy