Spain has had for years an organization known as ONLAE , which has achieved profits of almost 3.000 billion euros each year.
Many people think it's not a good idea to defend ONLAE, or at least to defend the idea that it should be a public service that the state can guarantee, which leads many people to advocate for the privatization of ONLAE.
According to the people who speak in favor of its privatization, there are many problems that the State has to offer before it can focus on the subject of games such as the lottery: health, security, justice of the country, etc. Therefore, fitting ONLAE as something that the country offers is not one of the most successful bets according to the Spanish.
Does it make sense to privatize?
For most people, privatizing it is the best option. However, before giving the definitive yes, we are going to take a short tour of certain points that we must first understand in order to reach a fair conclusion that is suitable for all.
Inefficiency in the public sector. In most forums and debates it has been said that it is not effective for the State and does not bring improvements to the public sector, however, the figures handled by ONLAE are much higher than those that can be obtained with any Spanish company , not only in the gambling sector, but in any field.
At first glance, it seems overwhelming, but the reality is that the figures are so high because ONLAE, being a state-owned entity, does not pay taxes.
The real chaos here is that they're trying to sell a company that's generating a lot of money for the country and whose profits are actually increasing, even during the worst years of the crisis. The question isn't whether or not to sell the State Lottery, but rather, at what price should it be sold?
How long does the government expect the State Lotteries to be privatized?
The current government is only thinking of privatizing 30% of State Lotteries at 5.000 million, which makes the total value of the company exceed 15.000.
Is it favorable?
The sale could be profitable if the government manages to sell the company for a very good price , even above that amount. If it gives in and sells the company for less than its market value, this could result in a clear loss for today's investors—that's all of us—since the country would gain much less but would have to invest much more.
Let's all do some calculations so we can figure out if privatizing the State Lottery is really an improvement or if it's just another mistake by the government.
The people who are going to buy ONLAE are currently Two simple questions: What is the amount of money that has to be paid and What is the amount of money that they are going to receive.
Let's suppose that you are an investor and you have 5.000 million to spend and you decide to invest in ONLAE.
Those 5.000 million only give you access to 30% of the company. Assuming that the company continues to earn as up to now, it assumes that with 30% you could earn up to 900 million a year. We are talking about a profitability of 20% always taking into account the currency exchange and that the benefits increase every year. The 30% profitability of the company is simply huge.
If we look at it as some people see it that those 5.000 million euros will go to the coffers or to the solvency of the government, we can also make a note on this issue. Suppose the government sells 30% of State Lotteries and suddenly wins 5.000 million. We are losing, since over 10 years, the amount would double with that 30% that is sold, so we can use the famous phrase of "bread for today and hunger for tomorrow."
We also need to clarify that this proposal to privatize ONLAE had already been made in 2010, but with the change of government it was forgotten and it was not until this year that Rajoy wanted to bring it back to the forefront.
The reason why it has been resumed is because many public companies have been privatized in order to improve the economy within the country.
Now, let's go to the other side of the coin and see what the position of the people is, if they bet on this sale, what are the reasons for privatizing LoterÃas del Estado
Leaving aside the millions that will be lost in the state coffers, let's list what we believe are the 10 reasons why privatization should take place.
The top 10 reasons for us to bet on privatizing state lotteries are:
- The government, although it would receive a little less, would still receive a large amount of money from state lotteries, since investors and the company itself would have to pay corporate taxes and also the bets contain VAT
- All the money received from the privatization of the state lotteries would be used to cancel the public debt which in turn makes the government save millions a year in interest and payments.
- The sale or privatization would help reduce the fiscal deficit due to the interest savings that we have mentioned before, therefore it would benefit many Spaniards.
- If the public debt is reduced and the fiscal deficit is also reduced, it can generate extra savings for the country in payments and, in turn, improve financing conditions for companies and individuals.
- By reducing the risk premium within the country, the risk premium is automatically reduced, which can improve profitability in investment projects. All these things, not only would avoid a tax increase, but they would get the current ones to be lowered.
- By placing State Lotteries on the stock market, foreign capital could be injected into the country and made known to the world of the financial market. This would mean more financing for Spanish companies
- State Lotteries, it would never cease to be a Spanish company. Not only will absolute control of the company not be transferred, but investors can be required to always center it in Spain.
- The reduction of the VAT, the fiscal improvement, the lower premium and the increase in investments could lead to the creation of thousands of jobs in the country.
- If we include all this, we only find one way to justify that the government, even with its cons, wants to privatize ONLAE, since it would be a very quick way to get out of a problem that would otherwise cost the government a lot of money and many years.
Among the main responses the government gives to people who refuse to privatize State Lotteries is that complete control of the company will not be handed over at the same time and it has been divided into sales of 30%, always leaving 10% of the country.
This can cause 30% to be sold first and the shares to revalue in the market in such a way that the price of the next% goes up.
Given that State lotteries is a monopolyIn case of privatization, an extra tax can be applied that can reduce the profits of people who buy bets from the state but would give more money to the country. This has a direct problem: many people will not want to invest for such a tax.
Another option would be to increase the VAT on the bets but the winnings would be reduced by 5%.
As conclusion and personal opinion
Selling off shares of the Spanish National Lottery (ONLAE) has been under consideration since 2010, as it was seen as one of the best options for overcoming the economic crisis that was beginning at that time. The reason is that ONLAE was – and still is – one of the most profitable public companies in Spain, and a significant amount could be obtained by selling only a few hundred percent of the company's shares. However, it's unclear whether this is truly beneficial in the long run.
Why State Lottery Sales Stopped
During 2011, the financial market faltered and did not allow interested parties to choose to buy it because asset prices in Spain plummeted. Although if there were offers, it was no longer worth the sale because they were very low.
Today, the sale of ONLAE has been brought up again to secure rapid financing and achieve everything outlined above. The aim is to ensure the company's revenue grows to at least pre-collapse levels, allowing it to maximize the return on one of the country's most profitable companies and thus achieve the greatest possible profit should it be privatized.