Business

Friday December 21, 2012

Berjaya accuses Philippine’s PCSO of allowing Bejaya unit's competitor to enter region without a public tender


PETALING JAYA: The current board of the Philippine Charity Sweepstakes Office (PCSO) has not only disregarded Philippine Gaming Management Corp's (PGMC) exclusivity to operate an online lottery in Luzon but also allowed its competitor to enter the region without a public tender.

PGMC, Berjaya Groups' gaming unit in the Philippines, was disappointed with the state-run lottery regulator for violating its exclusivity by allowing its rival Pacific Online Systems Corp (POSC) to penetrate its territory.

In an e-mail to StarBiz, PGMC president Paul Soo said: “PGMC has filed a contempt case against the board of PCSO for not honouring an existing contract and letting POSC enter PGMC's exclusive territory.

“An injunction was sought and granted. This was ignored by the PCSO. Thereafter, a contempt case has been filed. In the meantime, POSC continues to install additional terminals in Luzon, PGMC's exclusive territory, whose contract will only expire in August 2015.”

He also said that during the past 15 years under three former presidents and their appointed board of directors, PGMC operated exclusively in Luzon while POSC operated exclusively in Visayas Mindanao.

“Even POSC recognised this exclusivity issue as reported in their annual report that there was a clear segmentation of areas of coverage,” he added.

He said PCSO had instructed it to reduce its lottery equipment lease rate (including telecom costs) from 10% to 5%, a reduction of 50%, a move which would wipe out the operator's net income by 80%.

“As this (instruction) was drastic, we had suggested alternatives which were more reasonable,” he said.

After a month, PCSO came back to mandate PGMC to reduce the rate from 10% to 6.35%, but that would still translate into a reduction of net income by 50%, which was still very substantial, Soo said.

“Despite PGMC's appeal and explanation, PCSO said this was their final position in their letter. Two weeks after PGMC's response that the reduction was too large, POSC announced that they have agreed to reduce their rates from 10% to 9.85% (a reduction of 1.5%).

“Furthermore, POSC said that PCSO had signed an agreement allowing POSC to install 600 new terminals in Luzon and Vismin,” he said, adding that POSC continued to install additional terminals in Luzon.

He said PGMC would have resorted to the reduction if it were reasonable but the 50% reduction compared to its competitor's mere 1.5% showed that favouritism was in play.

“We are still bullish on this country except for this problem,” he said.

He also said PGMC had stayed and helped the country grow its sales through an active partnership in game development while the foreign partners in POSC, Tanjong and Gtech, had since sold out, as the first eight years of operation were not profitable.

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