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How would FIFA scandal impact on China?

By bloomberg business Wednesday, 24 Jun 2015 18:00

Wang Jianlin, China’s richest man, smiled from the middle of the first row, in front of the stage where FIFA President Sepp Blatter was about to be elected to a fifth term as global soccer’s top boss.

At Wang’s side on May 29 sat another Blatter, Philippe, the nephew of the FIFA leader and chief executive officer of Infront Sports & Media AG, a sports-marketing company that does millions of dollars worth of business with FIFA. Wang’s Dalian Wanda Group Co. bought Infront four months ago, an acquisition that Wang said would help China raise its global soccer profile and, eventually, play host to a World Cup.

Wang’s entry into the Blatter family’s orbit comes as others are distancing themselves from FIFA’s leadership. Even the Vatican has backed away from the soccer organization spiraling in scandal.

Four days after the elder Blatter’s electoral victory, the 79-year-old Swiss executive announced he would resign from the FIFA presidency. Combined with a sweeping U.S. corruption case against other senior FIFA officials, the resignation raises a vexing question for Wang: Now that his company’s $1.2 billion purchase of Infront has opened a channel to the Blatters, do those connections still matter?

At the time of the acquisition Wang said that buying Infront “would speed up the progress” toward achieving the dreams of Chinese President Xi Jinping, who is keen to elevate his country’s soccer stature. Its national team ranks 79th in the world, below the likes of Togo, Haiti and Uganda.

Luxury Boxes

Infront, based in Zug, Switzerland, has worked with FIFA since 1997; its business with the soccer organization continued after Philippe Blatter became CEO in 2006. In 2011, FIFA awarded Infront rights to sell television contracts to the 2018 and 2022 World Cups in 26 Asian territories, including China.

The company also owns a share in FIFA’s exclusive hospitality provider, Match Hospitality AG, which sells luxury boxes and premium seats at the World Cup. Match Hospitality said it had record sales of $262 million at the 2014 tournament in Brazil. It also has secured rights to the 2018 and 2022 events.

FIFA is a small part of Infront’s business, which includes working with 160 rights holders in various sports and managing 90 percent of skiing’s World Cup events, according to the company.

McKinsey Scrutiny

Sepp Blatter’s business relations with his nephew came under scrutiny in 2000, when he hired the consulting firm McKinsey & Co. at a time his nephew worked there.

Senior FIFA officials were angry that Blatter didn’t inform them of the agreement, which paid McKinsey about 12 million Swiss francs over two years to restructure FIFA, according to documents reviewed by Bloomberg News. The executives didn’t criticize Philippe Blatter, but said his employment at McKinsey was a conflict of interest for his uncle.

A spokeswoman for McKinsey, Rachel Grant, said the firm never comments on clients. She said Philippe Blatter left McKinsey in 2005. Delia Fischer, a spokeswoman for FIFA, said he was not the McKinsey partner responsible for the FIFA project at the time.

There’s no indication that the McKinsey agreement or Wanda’s acquisition of Infront has drawn scrutiny from U.S. or Swiss investigators.

In response to questions from Bloomberg News, Infront spokesman Joerg Polzer referred to statements the company made when FIFA awarded the rights to sell TV contracts. Philippe Blatter wasn’t directly involved in the talks over the World Cup contract, Polzer said at the time, adding, “We believe our offer was the most competitive package to FIFA.”

A Wanda press officer also declined to comment. But in a Chinese TV interview in March, Wang said the success of the Infront purchase isn’t tied to Sepp Blatter. “It has very little to do with whether he is the president,” Wang said. “The purchase would be of little value if it’s completely based on personal connection.”

Rebuilding Soccer

In acquiring Infront, the company anticipates China’s domestic market for sports beyond just soccer will grow from $8 billion this year to $800 billion by 2025, including media rights, licensing, merchandise and sports-facility operations.

Apart from his own business interests, Wang is responding to a request from Liu Yandong, a Chinese vice premier who leads soccer development. “Comrade Yandong spoke to me in person, hoping that I would take the task to help rebuild Chinese soccer,” Wang said at a ceremony for a program that sent 60 children to train at Spanish clubs in 2011, when Wanda spent $80 million backing the sport in China.

Sepp Blatter’s announced resignation may hinder his efforts. “With the purchase of Infront, Wang plays the role of a bridge,” through his business tie to FIFA and his channel to China’s leaders, said Ma Dexing, editor in chief of Titan Sports online, China’s largest sports Web portal. “Now it is snapped before work could begin, and they have to find another bridge.”

Then again, China may simply be too big to ignore, regardless of what happens to FIFA in the post-Sepp world. “With or without the Blatters’ tie, Infront has a standing partnership with FIFA -- that’s what got Wang a seat” in the FIFA Congress, says Liu Jianhong, chief content officer for Letv Sports Culture Development Co., a company backed by Wanda and Wang’s son.

It’s unclear how long China will have to wait to realize its World Cup ambitions. A day after Blatter’s election victory, FIFA executives agreed that the 2026 World Cup wouldn’t be held in Asia because the previous edition is slated for the region, in Qatar. So China wouldn’t be able to vie for the tournament until 2030 at the earliest -- unless a separate Swiss criminal probe into how Russia and Qatar beat competitors to host the next two World Cups forces FIFA to change locations for 2018 and 2022.

‘Strong Support’

The day before Blatter’s re-election, Wang met with Blatter and FIFA General Secretary Jerome Valcke. “Blatter promised strong support from both FIFA and himself towards developing football in China,” the Wanda Group said in a statement. “He believes Wanda’s acquisition of Infront will positively influence football in China.”

In response to questions from Bloomberg News, FIFA downplayed the meeting as nothing out of the ordinary given Wang’s new position as owner of a significant business partner. “Wang Jianlin was already in Europe and was invited to attend the FIFA Congress as a matter of courtesy,” FIFA said in a statement.

Wanda considered it more than simple courtesy. The day FIFA delegates elected their president to a fifth term, the company issued a statement noting that Blatter and Valcke had asked Wang to attend. Wang was “the only Chinese businessman invited to the congress, showing an unprecedented level of courtesy by FIFA towards Chinese football,” the company said.

Wang, who is Asia’s richest man and worth about $43 billion according to the Bloomberg Billionaires Index, also met former German star Franz Beckenbauer and FIFA officials from Asia and Africa.

Whatever happens in the next few World Cups, Xi’s commitment to soccer is clear. As vice-president, during a 2011 meeting with a South Korean official, he said he hoped his country would one day not only host the World Cup but win it. In March, Xi’s government said it would quadruple the number of soccer training academies to 20,000 by 2020.

Wang’s own enthusiasm for soccer dates to the 1990s, when his investment transformed an unknown team in Wanda’s home base of Dalian into a four-time national champion within six seasons.

The success also won Wanda supporters in the government. As the team kept scoring, one of its biggest fans was then-Dalian mayor Bo Xilai, who went on to gain national prominence until his 2012 downfall in a corruption scandal. Wanda became a national brand.

After Sepp

Sepp Blatter probably won’t be there to see if Wang’s efforts to boost China’s soccer stature actually bear fruit. While Blatter hasn’t been accused of any wrongdoing by U.S. prosecutors, he’s expected to step down by the end of the year.

The European parliament on June 11 called for him to stand down immediately. And the Vatican said it was suspending an agreement to receive charitable donations from FIFA’s South American confederation.

Still, Wang’s relationship with Blatter may provide some benefit beyond soccer. During their discussions in Zurich, Blatter said he would support Beijing’s bid for the 2022 Winter Olympic Games, according to Wanda’s website. As a member of the International Olympic Committee, Blatter is one of as many as 98 voters who will pick Beijing or Almaty, Kazakhstan, as host in a secret ballot next month.

His nephew, Philippe, may help there as well.

“A major asset for Infront is its influence on the winter sports,” said Ma, the sports editor. “China’s bid for the 2022 Winter Games needs to borrow the power and influence of Infront.”



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