Lottery meltdown raises questions about private operator’s cheaper technology

The single biggest question hanging over Wednesday’s lotto fiasco is whether the new operators have skimped on technology to recoup their hefty €405 million outlay for the licence.

Premier Lotteries Ireland (PLI) was already under fire over the roll-out of new technology before it was forced to cancel Wednesday's draw in the face of a near complete systems crash.

The company now faces serious reputational damage if it fails to rectify the situation quickly.

The decision by the Government to privatise the National Lottery, a franchise that had generated over €4 billion for good causes, was not a popular one. It was widely viewed as another fire-sale forced on the State by financial mismanagement elsewhere. However, Minister for Public Expenditure Brendan Howlin cleverly tied the process to the building of the new national children's hospital, making it a more palatable proposition.

PLI’s winning bid of €405 million – nearly twice that of its nearest rival – was heralded as a triumph for the Government.

Promised hospital

An ebullient Howlin kicked off his 2013 budget speech with news of where the money would be spent; not just on the promised hospital but also on a number of smaller projects designed to boost local economies mired in recession.

The winning PLI consortium, comprising An Post and the Ontario Teachers' Pension Plan, owners of British operator Camelot, meanwhile, dismissed criticism from rivals that it had overpaid for the Irish licence as sour grapes.

It soon emerged the strength of its bid was predicated on a competitive technology deal struck with Greek gaming firm, Intralot.

PLI sources claimed the new arrangement would seriously undercut the pre-existing deal with former technology supplier Gtech, which was rumoured to be about €15-€18 million per annum. By how much, we don't know.

What we do know is that the roll-out of new technology, involving the installation of some 3,700 new ticket terminals, is not going smoothly.

Retailers claim the new machines – touted in advance as state-of-the-art – are plagued by technical glitches, linked in part to the use of new camera technology, which replaced the harder-to-maintain scanner technology in the old terminals. They also claim the fact the new machines are not interfaced with separate ticket checkers in shops is causing delays and proving a headache for staff.

Shouting match

Hence the shouting match over Wednesday’s postponement – unprecedented in the lottery’s 28-year history – was more shrill than might have been expected.

Retailers' umbrella group RGData even called for the intervention of the new lottery regulator, Liam Sloyan, who is barely three months in the job.

Premier Lotteries is understandably desperate to apportion blame for Wednesday’s problems to its new telecoms provider, Telefónica. However, while the outage appears to have been triggered by Telefónica, there is strong evidence that the lottery’s own internal system and back-up did not function as planned.

Whether this is another teething problem, akin to the problems with the new machines, remains to be seen.

It is, however, a blow for PLI’s Canadian paymasters – Ontario Teachers’ Pension Plan – which is known to want Ireland viewed as a template for lottery privatisations elsewhere.