HONG KONG (MarketWatch) — For many years, there has been a conspiracy theory on Macau that international operators given licences to build casinos on China’s southern coast always had a finite life — eventually ownership would pass to the Chinese.
Allowing foreign, mainly U.S. casinos to indefinitely shovel takings home from China’s army of punters could not continue indefinitely. At some point the rules would change allowing mainland interests to take over, at a knock-down price.
The type of week Sheldon Adelson, chairman of Sands China (1928)
— that runs the flagship Macau Venetian and other casinos in Macau — just had, means this is one conspiracy theory that might not be too far fetched.
After learning that the Macau government had abruptly denied Sands the go-ahead for its fifth hotel and casino project on Cotai strip, this was followed up by an embarrassing police raid on the flagship Venetian Macau.
On the day that Adelson jetted into Macau, over 100 prostitutes were rounded up in the Venetian in a major police operation. The rejection of the land sites known as plots 7 and 8 on the Cotai also leaves a hole in the pocket, coming after the company has spent over $100 million on pre-construction work.
The timing may be coincidental, but it looks like a snub on various levels as the tables shift on billionaire Adelson.
After Venetian single-handedly established the Cotai strip (in an effort to match the Las Vegas strip) with the intent to transform Macau gambling into high-end family entertainment, this is a symbolic act.
The authorities are letting everyone know that beneath the chandeliers and plush carpets of the Venetian, the seedy underbelly of Macau remains unchanged. Coming together with the curbing of plans to expand the Cotai strip, suggest Adelson has lost favor with the Macau government.
Stoking tensions with the SAR government have been revelations from the sacked former President and CEO of Sands China, Steven Jacobs that are of WikiLeak cable-like in proportion.
Jacobs, who is suing his former employer for wrongful dismissal, alleges Sands China were involved in secret negotiations with Macau officials, where Adelson ordered him to use improper leverage to gain approvals for development. This involved gaining secret intelligence on top officials so any negative findings could be used to defeat future government actions against the interests of Sands.
The allegations extend to asking major Chinese banks to apply pressure on the Macau government to favor Sands China or risk losing business.
It is little surprise these kind of revelations and the loss of face that comes with it, could have damaging repercussions.
Another disclosure is that Adelson chose to allocate funds to the Marina Bay Sands in Singapore, while temporarily shelving some development on the Cotai strip. This led to 10,000 workers being laid off in Macau, sparking a public outcry.
Singapore’s arrival on the casino stage has also become a bone of contention with Adelson comparing its 8.5% – 21% gaming tax rate with Macau’s substantially higher 39%. Meanwhile, there have also been allegations high rollers are been diverted to Singapore from Macau.
Singapore Marina Sands opened earlier this year and has been a huge success, with close to $500 million turnover in the last quarter and an EBITDA of $241.6 million. According to company forecasts, it expects Singapore to comprise 44% of profits, Macau 43% and remainder the U.S. some time in the future.
This diversification means perhaps Adelson has less to worry about the authority’s action in Macau. Still, it has been reported that casino king pin Stanley Ho’s SJM Holdings (880)
is interested in acquiring the site in question on the Cotai strip. If Sands China loses the site, it would mean that all of Macau’s casino operators would have a presence on the strip that the Venetian pioneered.
Macau, meanwhile, will not have it all its own way as destination for mainland gamblers as there is speculation Hainan Island will also get the go-ahead for casinos and perhaps horse racing.
But greater competition might also benefit Macau. The emergence of other gambling centers in the region may prompt mainland authorities to be more careful imposing arbitrary looking visa curbs to turn on and off visitors from China.
It would be understandable if the stellar performance of Marina Sands in Singapore made Adelson feel less troubled by the situation in Macau. Much depends on whether the authority’s action last week is a shot across the bows or a taste of things to come for the beleaguered group, to know if there is more at play here than just a conspiracy theory.
View more information: https://www.marketwatch.com/story/fallout-from-macaus-own-wikileaks-2010-12-13