The Isle of Man's announcement last May that it will offer licences for international Internet betting and gaming has brought a flurry of interest from a number of major gaming groups. It is understood that the Island will issue the first three licenses (at a tasty £80,000 each) in September and last week it became known that MGM Mirage, one of the largest US casino groups, is in the running for one of the licenses.
If the Isle of Man attracts a few casino operators on the scale of MGM Mirage, it stands to profit handsomely from the 2.5% duty on gross yield that it has proposed to levy, which compares with the 10% gross profit tax that the UK is now intending to charge UK-based betting operators, whether on- or off-line. Not only does the Isle of Man compare favourably on tax, but the UK doesn't offer on-line gaming licenses at all, although allowing them is one of the recommendations of the recent Budd Commission.
For an international on-line casino operator, choosing a base is a tricky business. The situation in the US is extremely unclear, and varies from state to state - certainly there is no federal regulation allowing the issue of on-line gaming licenses, and many types of bet that are made across state lines fall foul of the 'Wir0e' Act. A number of offshore jurisdictions offer gaming licenses, including Gibraltar, Malta, Antigua (the favourite for many US operators), Costa Rica, Mauritius and Vanuatu (attractive for Australians). Near the UK, the front-runners are Alderney (part of Guernsey) and the Isle of Man.
It is thought that the 'respectability' of the Isle of Man compared to some of the other possible jurisdictions may have weighed heavily with MGM Mirage; the island's superior connectivity and good technical support facilities are probably also important.
Las Vegas-based MGM Mirage is also thought to be examining the possibility of opening a large casino resort in the UK if the industry is liberalised, as recommended by the Budd Report.
Last week MGM Mirage reported (NYSE: MGG) earnings of 47 cents per diluted share for the 2001 second quarter, compared with a loss of 13 cents per diluted share in the equivalent 2000 quarter. Excluding non-recurring expenses, the Company reported a 20% increase in earnings to $77.3m (48 cents per share) for the three months ended June 30, 2001, up from $60.7m (40 cents per share) in the prior quarter.
The company said: 'These results reflect the continued strong performance from the Company's casino and hotel operations and the impact of the historic acquisition of Mirage Resorts, Incorporated (``Mirage Resorts'') on May 31, 2000. Revenue and operating cash flow (``EBITDA'') soared 74% and 63%, respectively, representing the tenth consecutive quarterly increase in revenue and EBITDA on a year-over-year basis.'
'On a pro forma basis to account for the Mirage Resorts acquisition in both periods, revenue grew 2% to $1.05 billion while EBITDA increased 5% to $324.8 million in the 2001 second quarter.'
The company operates major gambling resort hotels in a number of US locations, particularly in Las Vegas, where it has six properties including the famous MGM Grand.
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