Ontario betting on Bell, Rogers to bid on lotto takeover

The cash-strapped provincial government is banking on a bidding war between Canada’s largest telecommunications companies for its lucrative lottery business.

thestar.com
Sept. 8, 2014
By Robert Benzie

The cash-strapped provincial government is banking on a bidding war between Canada’s largest telecommunications companies for its lucrative lottery business.

As first disclosed on thestar.com Monday, Ontario Lottery and Gaming has unveiled the final stage of the sell-off of its $3.3-billion annual lotto trade.

Sources say both Bell and Rogers are expected to bid on the property , which means Ontarians could soon buy Lotto 6/49 tickets on their BlackBerrys and iPhones.

Insiders admit OLG has not maximized the revenues it could make from lottery sales.

That’s because tickets are sold mostly at corner stores and supermarkets to older customers instead of online, via smartphones or at big box retailers to more youthful demographics.

But the deep-pocketed telecom giants have the know-how and wherewithal to modernize the lotto business, making it easier to buy tickets in new ways.

Rogers spokeswoman Jennifer Kett said “we don’t comment on rumours or speculation.”

Officials from Bell did not return calls and emails seeking comment.

The companies’ reticence to discuss the deal is not surprising.

It is believed some pension funds may also bid - the Ontario Teachers’ Pension Plan already operates the National Lottery in the United Kingdom and the Irish National Lottery.

In an email, OLG’s Tony Bitonti emphasized that “procurement involves information of a commercially sensitive nature.”

“As a result, details of the RFP (request-for-proposal) documents and names of pre-qualified service providers will not be released while the process is ongoing,” wrote Bitonti.

“There will be no further communication about the RFP until a service provider is announced. OLG expects to announce the successful service provider in fall 2015,” he continued.

Bitonti said no potential price-tag for the lottery could be disclosed because that’s part of the bidding process.

It’s estimated that it could cost as much as $1 billion for a private-sector operator to upgrade the lottery infrastructure to enable smartphone sales and other initiatives.

Ontario lags well behind countries in Europe, including the U.K., and American states like Illinois when it comes to digital lotto sales.

Critics worry that gamblers will spend more on lottery tickets if they can buy them online.

NDP MPP Catherine Fife said she’s “very concerned with the increase of youth and gambling addiction” and expressed unease with the plan.

“The OLG should be looking at ways to make the system work better and increase convenience for customers to buy lottery tickets. However, this government is so desperate to come up with new revenue opportunities, they’re banking on hitting the jackpot on people who can swipe and tap their smartphones,” said Fife (Kitchener-Waterloo).

Progressive Conservative MPP Vic Fedeli said “you can smell the desperation” from the governing Liberals, who have a $12.5 billion deficit.

“This is pre-empting Ed Clark’s report,” noted Fedeli (Nipissing), referring to the TD Bank president and CEO who is studying the monetization of government assets and is expected to make recommendations later this fall.

Government sources do not consider the move privatization, however, because OLG is merely seeking a contract with a service provider and would technically retain ownership and oversight of the lottery.

Still, the gambling agency is under the gun to increase revenues to the treasury. It brings in about $2 billion annually and the province hopes to increase that to $3 billion.

OLG’s lotto sell-off was originally announced in December 2012 by the government of then-premier Dalton McGuinty as part of a sweeping modernization of gaming.

“The service provider will be responsible for recommending strategies to maximize the growth and success of the lottery business, developing products and marketing plans, operations, and process and cost optimization,” the Crown agency said at the time.

“It will also serve as a single point of contact for OLG by being responsible for everything subcontractors do and ensuring they deliver on OLG’s modernization requirements,” the corporation said.

“In the future, OLG will continue its role in the conduct, management and oversight of lottery. This includes setting the overall strategy for lottery, managing the market by approving channel strategies and approving products.”