GVC bullish on regulatory prospects in Germany and beyond

15 August 2019

GVC Holdings remains confident that the business will be able to withstand potential regulatory headwinds across a number of its key and emerging markets, and believes it will see little change to German operating conditions.

This comes despite warnings that the country’s restrictive State Treaty on Gambling is likely to be strictly enforced until 2021, something the operator believes to be unlikely.

Following a meeting between representatives of the Regional Council of Darmstadt, the body in the state of Hesse handling the licensing process, GVC said “significant further clarity” on regulatory terms and timings was required.

Should no clarifications be issued in 2019, it said, delays to the issuing of sports betting licences in 2020 would increase. The Council will begin processing applications from the 2 January 2020, the first working day of the year.

With the State Treaty only in place until 30 June 2021, such delays may lead to legal challenges that could prevent the launch of federally regulated sports betting.

“There is, therefore, a realistic possibility that the regulatory position is not resolved until 2021, when positive re-regulation of the German online sports-betting and gaming market is expected,” GVC said.

As a result GVC remains confident that it will be able to continue providing in-play wagering, including match outcome and goal markets - which represent around 80% of its German in-play revenue - until 2021.

It also believes that it will be given dispensation to relax maximum monthly customer loss or spending limits. The State Treaty limits customers to staking €1,000 per month.

Finally, it believes that despite signs Hesse plans to strictly enforce the prohibition on online casino, it will be able to continue offering its igaming products in the market. The Regional Council has already warned that applicants will be required to shut down any casino products upon receipt of a licence.

The operator added that the ongoing strong performance of the German operation, with net gaming revenue up 23% year-on-year in the first half of 2019, would mitigate the implementation of the 5% turnover tax.

GVC’s positive stance on its German prospects contrasts those of Regulus Partners, which suggested that operators could see between 40% and 70% of revenue wiped out by strict enforcement of the State Treaty.

Looking to other markets, GVC talked up prospects in Brazil, where the Ministry of the Economy has launched a month-long consultation to build a consensus on a regulatory framework for sports betting. This runs until 31 August, with the operator noting that it would be able to build on its existing, leading position in the market.

In the Netherlands, GVC is also confident that it will secure a licence once the market opens in 2021, despite being issued with a €350,000 fine by Dutch regulator Kansspelautorteit for bwin’s historic activities earlier this month.

“The group intends to pay this fine, however firmly disagrees with the basis on which the sanction decision has been taken and reserves its rights to potentially contest the fine in the future,” it said.

GVC added that it was adhering to the current guidelines and would continue to do so until the Remote Gaming Act comes into effect, and the market opens for business.

Meanwhile Italy’s so-called Dignity Decree, which introduces far-reaching restrictions on gambling advertising, was then described as being less of a threat as a result of the ability to advertise, in informational forms.

“[This] means the expected adverse impact on the market is likely to be less than had been expected under a blanket advertising ban,” GVC explained. “The group's portfolio of brands in Italy (Eurobet, bwin, Gioco Digitale) are very well established, and combined with the Eurobet Retail estate, which offers a seamless multi-channel solution, are expected to outgrow the market in the second half.”

Finally, as reported in its first half results, the operator has also outperformed expectations in the UK, where maximum B2 gaming machine stakes were cut to £2 from 1 April. A Gambling Commission consultation on the use of credit cards for gambling was also described as likely to have minimal impact on group revenue. Credit cards account for just 6% of customer deposits.