Interest in Mobile Gambling Drives Telecom Acquisition in Asia

Pending approval from shareholders as well as the governments of Macau and China, Hong Kong telecom company Citic Telecom International Holdings Ltd. is set to become the 79% owner of Macau phone operator CTM, with the ultimate plans to increase its share to 99%, according to company statement.

Citic will use its own resources as well as obtain new loans to put together USD 1.16 bln for this purchase of Macau’s landline operator that has monopoly rights on local and international voice and data services for the next 3 years. These rights can then be extended until the end of 2021, essentially giving Citic an 8-year monopoly.

CTM also offers mobile phone services. Although it does this alongside several competitors, this is the segment where most analysts see the real growth potential – especially due to the skyrocketing demand for quick and easy access to mobile casino gambling.

There are already three times as many mobile phones registered in Macau than there are inhabitants, and many of the owners are keen on using their devices for gaming. This special region returned from Portuguese to Chinese sovereignty at the end of the 20th century, and remains the only area in China where casino gambling is legal, in sharp contrast even with the prohibitive Hong Kong gambling laws.

The local gambling industry is of course built around regional tourism. A large number of visitors arrive from other areas of the country, many of them from the other special region, since not only casinos are illegal but it is even forbidden to play online poker in Hong Kong. Macau thus serves as China’s Las Vegas, with the marked difference that its gambling revenues are five times higher than those witnessed in America’s gaming capital.

This particular combination of gambling and technology creates a special opportunity for Citic. “As long as the gambling business continues to grow, the telecommunication business will also prosper. The deal will enhance the profitability of Citic Telecom,” claims Guosen analyst Bill Fan.

Company CFO David Chan thinks Citic will see “good, enjoyable growth” in the coming years, and the market certainly seemed to agree, with shares closing the day 13% higher.