Maltco: Leaving nothing to chance

The key to running lotteries and gaming is properly calculating the risk, the chief executive officer of Maltco John Katakis said.

“Every business needs to be run efficiently if it is to make a profit. But this business is also very dependent on risk management,” he stressed.

Although probable outcomes are subject to the laws of mathematics, there are still a number of variables which have to be factored in according to each pro-duct, he explained, adding that it was majority shareholder Intralot’s expertise in this area which had made it so successful.

“The profit margins are not guaranteed – especially with high-risk products like sports betting, where you could go bankrupt very quickly if you do not get it right. And you need to understand the local market. You cannot just go into a new country and roll out the same product you have elsewhere. Many companies have gone into a new market with a product that was not well designed for the culture there – and ended up losing money.”

Maltco’s offering here is considerable. Compare it for example with Camelot in the UK, which only offers a lottery and a scratch card game.

“It has no international exper-ience either. It is not easy to set up such a complex concept!” he said. “It takes a lot of know-how and a lot of parameters. And the investment in software is considerable – the fact that Intralot has its own makes us very agile and able to launch new products very quickly.”

With more and more games for people to play, Mr Katakis always keeps in mind that success depends on offering people entertainment – and a reasonable chance of winning.

“This is not a casino where they put all their money on a roulette wheel and it is all over in seconds. With sports betting, for example, it is much more involved and much more skill-based than chance-based. With other games the challenge is to find a formula which means that it is not too difficult to win because the punters simply won’t play, but not too easy to win because that actually reduces their pleasure when they do win!”

Maltco was earlier this year awarded a second concession and the focus in this second term will be outlets, with a €5 million investment.

Maltco has upgraded all the equipment in the outlet – as well as boosting the number of outlets selling its products from 180 to 230. Only one actually belongs to Maltco itself; the rest are anything from lotto receivers to band clubs which have passed the regulatory tests for eligibility.

“We are currently trying to persuade the lotto receivers to also invest in their booths as they need to compete with the larger outlets where punters can go online, play in comfort and get good entertainment value out of it. This is what people are spending their money on; it is not just about buying a ticket to win … people want to be challenged, so we are moving to more and more complex and varied games.

“The new outlets showcase our new concept … We have a lot more television screens so that punters can watch the sports action live, with loads of statistics and results, a product we call Horizon. Customers like this immensely because they feel they have as much information as everyone else, that it is a level playing field, and that it is their skill which makes the difference. In this area, we leverage our connection with Greece as we can tap into its global network. We can offer as many as 500 games simultaneously! It is a massive undertaking. Don’t forget we have to get all that information ready to print for U*Bet within a few hours! And Malta is ahead of the pack in some areas.For example, here you can watch live horseracing from Sweden, the UK and Ireland,” he said.

When it comes to competition from the gaming outlets opening up around Malta, it seems Maltco has little to fear.

“Slot machines are a totally different thing. There is no choice, no skill involved,” he said. “They attract a different player for different reasons.”

Maltco now offers a wide range of gambling products, from scratch cards to sports betting. The only thing missing is video lottery terminals.

“These are a different concept but if the Maltese Government does allow them, we would encourage it to do so in a credible way. Intralot is very active in this sphere – we monitor over 20,000 machines in New Zealand, for example, and could easily provide the machines and software.”

The huge amount of money involved in lotteries and gambling brings with it a huge amount of responsibility, and Maltco has very strict controls over everything from possible money laundering to irrespons-ible gaming. It has taken action on a number of occasions when it identified unusual patterns of play, for example.

“Apart from daily inspections being carried out, we can also pick up anomalous winnings, pay-outs, and large bets. The incidents we had were few and far between and were not repeated, so our monitoring system clearly works effectively. We have not had any cause for alarm.”

Maltco also invested in protecting the customers themselves. For example, when you hand over your ticket to the counter clerk asking them to check whether it is a winning one or not, doesn’t it cross your mind that if it were, they might be tempted to tell you that it was not and then keep it themselves? Well, one innovation will help to reassure customers: there is now a ticket checker in each outlet.

Although some people may have reservations about gambling and the possibility of addiction, the CEO is convinced that the main threat comes from illegal and unregulated gambling, which exploit the underage as well as compulsive gamblers.

“There is no doubt that having competitive outlets for sports betting has hit hard at illegal activity in bars and restaurants because in the end, the customers want to know that the outcome is fair.”

He laughed when challenged about the oft-reported stories that the sale of essential food items is negatively affected by people spending money on Super 5 tickets when the jackpot goes up.

“I have been saying this for years but the story keeps cropping up. It is just that more people are enticed to play rather than that our regular players buy more tickets …” he said.

Maltco by numbers

Maltco was set up in 2004 with a 73 per cent shareholding by Intralot SA and the remain-ing 27 per cent owned by high-profile Maltese businessmen .

Intralot is the biggest Greek multinational, active in five continents and with a domin-ant presence in 12-13 American states.

Maltco was granted a licence to operate the national lottery for seven years in 2004. In July 2012 it won a second 10-year concession with a €39.1m bid, beating a rival €36.2m bid byGTech, a subsidiary of Lottomatica.

Until the first quarter of 2012, Maltco contributed more than €130 million to the Maltese economy by way of licence fees, lottery duty, unclaimed prizes and taxes.

Intralot generates only five per cent of its revenues and eight per cent of its EBITDA in Greece. Fitch Ratings recently assigned it with a Long-term Issuer Default Rating of ‘B+’ based on its well-diversified contract portfolio. The outlook is Stable.

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