Multilotto Fails to Renew License in Sweden
The China-based lottery solutions operator 500.com has declared the temporary suspension of operations of its subsidiary in Sweden, The Multi Group (TMG). The suspension of operations has come after the subsidiary’s license expired in Sweden and the operator failed to renew it in time.
TMG, which is based in Malta, was operating the Multilotto lottery betting brand in Sweden and was originally granted a year-long license to operate by Spelinspektionen, the national gambling regulator in the country. The operator did not renew this permit in time, however, and as such it expired.
500.com has stated that TMG is communicating closely with the regulator and is looking to renew the license and begin operations again as soon as possible. The betting brand has announced its plans to renew the license and recommence operations in Sweden by mid-February 2020.
Revenue from TMG accounts for roughly 99.1% of the total net revenue for 500.com for the third quarter of 2019 in reports published last year. Of this, around 61.3% originated in Sweden.
500.com acquired the majority stake of TMG for €49.8m in 2017. In this deal, the operator gained control of about 93% of the outstanding shares in TMG.
Turbulent Times for 500.com
The news of this suspension of activities comes after a series of unfortunate events for the lottery solutions provider.
In November 2019, the company announced in a financial report that there was a 67.6% year-on-year decline in the third-quarter revenue.
The provider’s revenues fell to RMB9.8m during the third quarter for which the company blames a large-scale migration to a different website in Sweden, as well as the ending of sports information services in China.
TMG accounted for a large proportion of the revenue that was generated during this period though. As such, it is imperative for the company to regain the ability to operate in Sweden.
The main reason given for the decline in revenue for the operator was due to a change in the license for the operator in Sweden. The license had to be converted, which led to the migration of the services to a new website. This change then required players to re-register for the service, which was, according to 500.com, responsible for an RMB14.2m reduction in revenue from TMG.
The issue was compounded by the decision to stop providing sports information services in China, which was made in March 2019. This accounted for an additional RMB6.5m in lost revenue according to 500.com.
During the period, the operating expenses for the service provider also dropped but did not drop sufficiently to account for the loss in revenue. Here, the expenses fell 42.8% to RMB79.0m.
A large part of this decline in operating expenses came as a result of reduced compensation expenses from share options given to 500.com’s employees. This totaled RMB27.5m. There was an additional RMB13.6m fall in costs caused by changes to the marketing strategy and the lower consulting expenditure saved the company an additional RMB5.6m. Lower staff costs also contributed, leading to an RMB4.7m drop in expenses.
This has not been the only difficulty for the company in recent times. In early January 2020, the CEO of 500.com was forced to step aside amid a scandal involving accusations of bribery in Japan.
The provider stated that Zhengming Pan, the director, and CEO of 500.com requested to step away from the positions he held. This change is seemingly temporary, and the CEO plans to take back his role in the company upon the conclusion of an internal investigation. The investigation will focus on alleged illegal money transfers that are related to the development of resorts in Japan.
The inquiries will be made by a special investigation committee which has been formed by 500.com. This committee will look into the conduct of the company in Japan, as well as the role played by consultants. This follows the arrest of one consultant, who was a former director of 500.com’s subsidiary in Japan. Two former consultants will also be investigated by the Tokyo District Public Prosecutors Office.
There are suspicions that these consultants were responsible for bribes given to a member of the ruling party in Japan. These alleged bribes were given to gain a favorable position with the Japanese government for a bid to run one of the upcoming casino resorts in the country.
This scandal has also led to the resignation of the company’s chairman, Xudong Chen. Chen is to be replaced by Shengwu Wu, and Zhaofu Tian has been chosen to become the interim CEO in Pan’s absence. Tian was previously the chief technology officer for the company.
Multilotto’s Swedish Future
The operator plans to renew its license in Sweden in due course and as it is working closely with Spelinspektionen this is likely to go down without a hitch.
There have been recent problems relating to licensing for other operators in the country, however, so it is not certain whether TMG will encounter similar issues.
Many operators in Sweden, including LeoVegas, Aspire Global, Gaming Innovation Group and Hero Gaming, were only given licenses to operate in Sweden for a year by the regulator last year. These rulings were overturned upon appeal, however, and longer licenses were granted.
Similar issues may also affect TMG in Sweden, and the operator may only be granted a reduced license to operate. If this is indeed the case though, the decision will likely be overturned upon appeal, so the operator will be able to secure a longer-term license.