Case Interview Question #00248: Suppose you are a senior executive at Booz Allen Hamilton (BAH). The other day you met the Belgian Minister of State Owned Enterprises and he asked you whether it would be a good idea to privatize the National Lottery in Belgium (i.e. also to liberalize the market and to open it to the competition).
Before accepting the engagement, you perform a quick analysis of the situation in order to see whether the idea is worth spending more time on or not. Remember, your firm has a reputation of excellence to maintain and does not want to be involved in any projects that could potentially fail. What is your recommendation? Do you accept the project? Why is it a good or a bad idea to privatize Belgium’s National Lottery?
Here are some background facts about the National Lottery industry in Belgium and previous privatizations.
The National Lottery enjoys a monopoly and offers different products. For all of them, the probability to win is fixed by the Government, as is the price of each ticket. By now, half of the bets must be returned to players. The other half goes to charities or development projects (that have to be financed anyway) after the distribution and administrative costs have been paid. Lottery tickets are distributed through newspapers kiosks and supermarkets who receive a fixed amount per ticket sold. Lottery gains are tax-free.
In the recent years, the Belgian Government has privatized the telecom market and it has been a huge success. The incumbent and the new entrants make much more money than before. The Belgian Government is trying to reduce its debt and is looking for other privatization opportunities.