HONG KONG (Reuters) - Macau, the world’s largest gambling hub, has extended casino licenses for MGM China and SJM Holdings until 2022, bringing them on par with other operators, authorities in the Chinese territory said on Friday.
The Macau government said the MGM and SJM’s licenses, set to expire in 2020, would be extended for another two years with both operators required to pay a one-off fee of 200 million patacas ($25 million).
Shares in MGM jumped 10 percent while those in SJM rose over 5 percent after resuming trading following the announcement.
The license extensions in the only part of China where casinos are allowed will give authorities more time to consider how to diversify the gambling-dependent economy.
The expiry of the casino licenses had been a major concern for investors, company executives and analysts as the government had provided little information until now.
Macau’s other operators, which include Sands China, Wynn Macau, Galaxy Entertainment and Melco Resorts & Entertainment, will need to rebid for their licenses scheduled to expire in June 2022.
With no information on the rebidding process, the license situation will likely hang over the shares of the six operators, said Grant Govertsen, an analyst at Union Gaming in Macau.
“We believe the extensions have more to do with making the ultimate task of the license rebid situation easier, while at the same time making sure the labor market remains stable,” he said.
Macau’s economy is heavily skewed towards casinos with over 80 percent of taxes coming from glitzy gambling halls. China’s government has issued strict warnings to the former Portuguese colony that it must diversify away from gambling.
Policy and regulatory changes are in focus with the election this year of a new leader in the special administrative region, who will work with mainland authorities for the next five years.
The two likely contenders are Ho Iat Seng, president of Macau’s Legislative Assembly, and Lionel Leong, the secretary for economy and finance, which oversees the gaming industry.
Macau is marking 20 years since its handover from Portuguese rule, with a slowing mainland economy, a weaker yuan and China’s trade war with the United States threatening to derail growth.
Casino licenses were first awarded in a complex process in the early 2000s, resulting in a slew of legal battles with some still unresolved. The process remains controversial because little is publicly known about how the winners were chosen.
Initially concessions were given to Wynn, a Galaxy-Sands team and SJM. After Galaxy and Sands failed to reach an operational agreement, they split up with the government awarding Sands a subconcession license. This paved the way for Melco and MGM to receive subconcessions.
SJM Holdings has multiple third party casino operators under its license which run independent properties.
Many of these local casino operators have been publicly jockeying for a license, with analysts and executives speculating that the government may permit additional licenses to the existing six operators.
Reporting By Farah Master; Editing by Himani Sarkar and Darren Schuettler