€30 million bond issue full subscribed
In less than three months the National Lottery of Malta will experience a major transformation, when on 5 July, Maltese-owned National Lottery plc, a fully-owned subsidiary of IZI Group plc, will take on the responsibility of operating the National Lottery of Malta, operating Lotto, Super 5 and other games for the next 10 years.
The Malta Business Weekly met with FRANCO DE GABRIELE, chief Commercial officer of IZI Group plc, to better understand what this major development will mean for the Group and how the Group aims at transforming the National Lottery of Malta into a European best practice in the sector.
You have been working for over two years to be in a position to add the operations of the National Lottery to your existing portfolio of land-based gaming services. How does the National Lottery operation fit within the portfolio of the Group and what are your aspirations for taking over a national concession of this magnitude?
The IZI Group has been operating in the local land-based gaming industry for 20 years, having grown from strength to strength to become one of the most established and reputable operators in the industry.
In the past 10 years, through the operation of the Dragonara Casino and the establishment of Izibet as a gaming brand synonymous to sports betting, we have established ourselves as a market leader in all those business verticals that we operate in. Our journey towards becoming the National Lottery concessionaire for the next 10 years started over two years ago, through the setting up of a working group that devised the overall strategy for the new National Lottery of Malta. The strategy included, among others, thorough market research, engagement of world-class strategic partners (especially in the area of product delivery and technology), raising of finance and granularly detailed business planning.
The result of our preparatory efforts led to National Lottery plc being declared the “preferred proponent” in the competitive RFP process and the signing of the concession agreement with the Government of Malta. The operation of the National Lottery elevates the overall positioning of the Group, creates several synergies among various functions within the Group and opens timely opportunities for international growth. It also enables the Group to pursue its overall mission to seek growth opportunities through the relentless investment in technology. Our aspirations are to grow the business of the National Lottery such that Malta as a lottery market can reach European benchmarks.
What do you consider to be the key strategic areas for attaining the principal goals for the National Lottery?
The operation of the National Lottery of Malta bestows onto us great responsibility but also unparalleled opportunity. There are intrinsically three areas of strategic importance to ensure that our principal goals for the National Lottery are attained. Firstly, a product-oriented strategy in which current products are rationalized according to their true potential and the introduction of new products. Our product strategy is very market-driven and will be a strong pillar onto which we will build our business.
Second is the distribution of the products. We will work closely with one of the most important stakeholders in this business, namely the agents and sellers of National Lottery products, to ensure a more efficient, innovative and accessible distribution network. We will bring to the fore, years of experience in operating the largest privately-owned network of retail gaming stores in Malta and transfer this knowledge to the National Lottery network. Product accessibility is fundamental to drive growth in the market.
Third is the player experience. As explained prior, the National Lottery bestows great responsibility because the products of the National Lottery are in demand by hundreds of thousands of players. To this end we will endeavour to provide a product portfolio that is accessible in a safe and fair environment, in full compliance with the requirements of player protection and responsible gaming.
The National Lottery project requires a substantial capital investment. What are your investment plans going forward?
The nature of the business is as you are saying very capital intensive. The Group has committed approximately €125m over the next 10 years to deliver a modern National Lottery service. An outlay of €105m is payable to the Government of Malta for the 10-year exclusive concession for the National Lottery and a total capital expenditure of a further €20m is being made to deliver the infrastructure onto which the National Lottery services will be delivered.
We have presented our business plans to the local capital market a few weeks ago as we launched a €30m public bond issue, which was fully-subscribed. The proceeds of the bond issue are targeted principally towards the capital investment required for the National Lottery project but also to the growth programmes of the other subsidiaries of the Group operating the Dragonara Casino and the Izibet retail network. The bond issue was very well received by the market and was fully subscribed. The response of the capital markets towards our future business plans provides us with the necessary confidence to continue pursuing our strategic objectives.
What do you consider to be the key external factors impacting the National Lottery?
There are two principal factors which require a concerted effort between all stakeholders. Most notably is the problem of illegal gambling, especially in the game of Lotto, which remains extremely high in Malta. Apart from being economically harmful, illegal gambling is also fertile ground for abuse as it does not offer the right protection for players. While this challenge must be addressed through a collaborative effort of all stakeholders (including the competent authorities), we will combat this through the provision of a better mix of products and better return to players.
The second challenge lies in ensuring player protection and providing a safe and fair environment to players such that they continue to trust the National Lottery and the products offered through the National Lottery concession. Unfortunately, the market is inundated with online “secondary lotteries” promising jackpots of millions of euros which can never materialize. The term “secondary lotteries” is a misnomer in fact. Secondary lotteries are the purest form of online gambling and are by no means a lottery type game, despite being misleadingly advertised as such. It is important that yet again the competent authorities, in particular the Malta Competition & Consumer Affairs Authority, address these issues to ensure that the market retains confidence and trust in a service that has been in the market for nearly 100 years.