Online Gambling Group, Bwin Has A Problem
Published: Friday, August 11, 2006 Online-Casinos.com
BWIN HAS A PROBLEM
Austrian gambling group's German license pulled - Bwin accuses authorities of perpetuating a monopoly
Bwin, the new brand for Austrian public company Bet and Win ran into trouble with the German authorities this week. Exacerbating share price problems caused by an earlier profit warning, the state government of Saxony issued a ban on the group's operations.
Associated Press reports that the gambling group, one of the biggest in Europe could be prejudiced to the tune of millions of Euros in lost business and equity losses and has threatened legal action over the license removal.
The German state of Saxony banned bwin.com Interactive Entertainment from taking sports bets in Germany, sending the group's stock into a sharp southward decline.
Shares in Bwin extended Wednesday's 30 percent slump, triggered by a newspaper report predicting the ban, dropping as much as 15 percent on Thursday to levels last seen 18 months ago. The losses were later recouped, with trade up 2.8 percent at Euro 23.65 by mid-afternoon Thursday.
"Operating and arranging sport bets as well as advertising for it without official approval is... criminal and hence forbidden," Saxony's interior ministry said in a statement a day before Germany's premier soccer league Bundesliga kicks off. "This ban is valid for all commercial betting operators, regardless of whether they cite licences from Gibraltar or (Bwin's German base) Neugersdorf," it said. The ban applied to the whole of Germany, Saxony junior minister Juergen Staupe said.
Bwin e.K., whose betting licence was issued by East German authorities before reunification, said it had a two-week grace period before the ban would become effective, during which it could challenge the ruling in a Dresden court.
"This is an attempt to deprive my Saxony-based company of its means of existence, just because politicians want to keep the (state) betting monopoly for fiscal reasons," said Bwin e.K. co-owner Steffen Pfennigwerth in a statement.
Bwin acquired a 50 percent stake in Bwin e.K. in 2002. It declines to publish Bwin e.K.'s revenues or customer numbers. Analysts estimate that at least 30 percent of Bwin’s sports betting revenues comes from Bwin e.K., mainly for soccer bets.
Bwin has lost Euro 2.8 billion ($3.6 billion) in market capitalisation since its peak at Euro 105.50 in May.
The group's latest German woes come after a March ruling by Germany's Constitutional Court which ordered Germany to revise its betting laws but said it may keep its state betting monopoly in the revision and ban commercial bookmakers in the meantime.
The court said the state betting monopoly may be justified in principle to protect citizens against the vices of gambling, but criticised Germany's state betting monopoly Oddset for aggressive advertising inconsistent with this goal.
The European Court of Justice ruled in a similar case three years ago that banning commercial bookmakers contradicts European Union rules on free provision of services. Nations had to give evidence such a restriction was justified, it said.
Oddset has since reined in advertising to comply with the court's conditions and regional German politicians have said they would aim to keep the state monopoly in any new law.
Bwin is also under fire by German states trying to prohibit the company's sponsorship for Bundesliga teams including 1860 Munich and Werder Bremen, which show its logo on their jerseys.
Bwin is due to report second-quarter results next week. It has said last month marketing expenses for the soccer World Cup resulted in a core loss in the quarter to June.
