MB March | The Imbroglio | Extension vs. Expiration

To produce the report “Concessions Renewal: preparing for an arduous journey” (2016), investment bank Daiwa Capital Markets tapped legislator Pereira Coutinho, who did not hesitate to anticipate that “the issue of licence renewal [would] be contentious”. In fact, he did “not rule out the possibility of a public outcry if the government does not aptly handle the treatment of the sub-concessions.” 

Mr. Coutinho’s view is premised on what he perceives as the sub-concessions’ questionable legality. Twofold: on the one hand, the law states that there should be no more than three concessions, while today there are effectively six. In addition: “The sub-concessions were not awarded through public tender, when the law says that such a step was required.” 

History will harshly judge the possibility presented by the Macau Government to turn three concessions into six – a complete illegality which raised a number of questions eventually discarded in 2015 when the sub-concessions collectively generated MOP108 billion in gross gaming revenue and represented 46% contribution to Macau’s total gross gaming revenue. 

It all started when the concession that was awarded to the joint venture between Galaxy and Las Vegas Sands (LVS) was split in two due to what was then described as differences in the development visions of the two companies. 

Thus was born a sub-concession, a situation not provided by the law. LVS did not have to pay a sub-concession premium to Galaxy but was instead responsible for MOP4.4 billion of Galaxy’s original MOP8.8 billion investment commitment. “This led to some inequities among the licence holders and, as a consequence, the Macau Government allowed each of the remaining two concessionaires to issue a sub-concession,” according to the Daiwa report.  

With the door now open, MGM received its sub-concession from SJM for US$200 million on 20 April 2005, while Melco was granted its sub-concession for US$900 million from Wynn on 8 September 2006. 

These amounts were paid to the concessionaires, without the MSAR coffers having seen a single pataca, which did not fail to harm the public interest. 

“In essence, there are no differences between the six operators” (Changbin Wang

Another problem: if there were more than 20 contenders interested in the liberalisation of gaming in Macau, and only three (two) were chosen how was it that the authorised licences allowed for the remaining three, especially MGM and Melco? 

The sub-concessions were created by the governments of Edmund Ho – Chui Sai On has been limited to managing the inheritance, convinced that Macau is benefiting with six operators rather than the initial three. 

In principle, it will be up to the incumbent Chief Executive to find a solution for the imbroglio. 

The conviction of the experts consulted by Macau Business is that this government will present proposals that frame the issue (even if it is the next Chief Executive who implements them).  

And no-one doubts that the sub-concessions will be extinguished should the same happen to the primary concessions. “The change leads to a technical division between the ‘concessionaires’ and the ‘sub-concessionaires’,” points out Changbin Wang. This professor of Gaming Law and Regulation at the Gaming Teaching & Research Centre (Macau Polytechnic Institute) sums it up thus: “In essence, there are no differences among the six operators.” 


16 years not enough 

Originally, Las Vegas Sands (LVS) partnered Asian American Entertainment Corporation (AAEC) in submitting the joint bid during the tender process. But in the middle of the gaming liberalisation process LVS decided to leave AAEC to join Galaxy. 

Taiwanese businessman Marshall Hao, who led AAEC, did not accept the ‘expulsion’ and has since been contesting the issue in court. 

Sixteen years have passed and the process remains not only unresolved but has not yet begun: last year, it was learned that the proceedings will carry forward in the local Court of First Instance. 

That is, we will have a judgment soon, with the AAEC asking for monetary compensation for the termination of the relationship (unless both sides reach an extrajudicial settlement, which seems unlikely given the level of litigation so far engendered). 

The question is whether all will be clarified within the 20-year term of the concession granted in 2002 to Galaxy / LVS. 


Love me (Public) Tender | Extension vs. Expiration