The sale of the State's lottery licence is unlikely to net the exchequer anything like the €400-€500 million originally forecast, according to a senior gaming analyst.
Based on the new licensing arrangements, he said the franchise was more likely to attract an upfront payment of €200-€250 million, which is equivalent to just one year’s funding for good causes.
With the deadline for bids looming, the Government is hoping to cash in on a global trend of lottery privatisations.
The analyst, who spoke on condition of anonymity, estimated the Irish business would generate about €18-€20 million a year in earnings when prize payouts, good causes and costs were taken into account.
He said “state monopoly concessions” typically sold for about eight to 10 times the annual earnings of the business.
“Looking at the structure of the licence and what earnings that would deliver, and applying some benchmarks from the sale of other state monopoly concessions, you get to a figure of around €200 million.”
Online sales
"It might go for more than that because it is strategic to some people or maybe they think they can run it more efficiently but it doesn't get you to the €400-€500 million that's been talked about in the press," he said.
The next operator is likely to pocket about €400 million in earnings over the proposed 20-year licence term, even without the expected jump in sales from a less regulated online environment.
He said the Government had opted for a shorter licence duration, most likely to give it “greater flexibility” in choosing future partners.
There was a “certain industrial logic” to the proposed 20-year term, he said, as the average life-cycle of a lottery system was 10 years, with one “technology refresh” in each cycle.
However, he said opting for a term at the lower end of the spectrum had pricing implications.
“The Government is a rational actor and would be well aware of the value implications of what it is doing,” he said.
Minister for Public Expenditure and Reform Brendan Howlin has ring-fenced €200 million from the sale for proposed children's hospital.
Mr Howlin said he was confident the next operator would be in a position to increase the amount given to good causes from €225 million a year now to €300 million within five years on the back of more favourable licensing terms.
The deadline for bids closes on Friday.
