The French market’s tough tax regime has claimed a further scalp, with French telecommunications giant Iliad pulling the plug on its gaming subsidiary and the Chilipoker.fr and Chilipari.fr websites.
Iliad, that owns leading French ISP Free, revealed its Iliad Gaming subsidiary had lost €4m in the two years since the French regulated market opened, generating just €1.2m in turnover in 2011. The sites are run in partnership with Chilipoker.com owner Gameinvest Holdings.
Thomas Reynaud, chief financial officer and chief development officer of Iliad, told La Tribune: “Iliad is closing down this activity. This is not the heart of our business. The competitive environment and the tax on online games does not leave space for new entrants or to operate viably. ”
Sportsbetting website Chilipari.fr stopped offering sports betting 3 July and will be closed down on 9 July. Chilipoker.fr will stop offering online poker in the coming weeks, with all customers refunded, according to Reynaud. Iliad Gaming’s Turbopoker white label will remain operational on Playtech’s French iPoker network, with ownership of the domain passing to a third party on the platform.
While Reynaud said the losses from Iliad Gaming – that reached €2.8m in 2011 – had remained manageable, he said the market remained too economically difficult to continue. Iliad’s losses however pale next to those reported by fellow French operator BetClic Everest, owner of the BetClic, Everest Poker, Expekt and Bet-At-Home brands, which recently announced a net loss of €90m in 2011 due mainly to the tax conditions in its core French market. LB Poker, jointly owned by former French lottery monopoly FDJ, land-based casino company Groupe Lucien Barriere and On Line 3D Gaming, also recently reported a sizeable net loss of €30m, off a turnover of just €3.37m.
Just 32 of 45 licences issued by the French regulator ARJEL remained active as of May 2012, with several companies, such as leading Italian network provider Microgame, even revoking their licences before even launching in the market, due to the difficulty of building a sustainable business under the current tax system. While ARJEL has recommended levying taxes on gross gaming revenue as opposed to stakes – the 8.8% turnover tax on sports betting is equivalent to 50% of GGY – the previous government ruled out such a move for the foreseeable future, with the issue reportedly far down the priority list of the new French administration. Operators have argued that the high tax rates with no casino to mitigate risk favours monopoly incumbents PMU and FDJ and increases the appeal and value of the offer available on offshore sites, hindering the growth of the French regulated market.
The prohibitive tax rate introduced by French authorities led many leading pan-European operators, such as Willliam Hill, Sportingbet, Betfair and Ladbrokes, deciding against entering the ringfenced dot.fr market.