analysis
OPAP stake sale heats up
The Greek economy may be in dire straits, but a stake in gambling monopoly OPAP, put up for sale by the government, could make investing in the country very worthwhile Tom Washington
Greece responded quickly, stating that sports betting would not be regulated and that OPAP would maintain its monopoly online and offline until 2020, yet it fell short of con?rming which other products would be included. “At this point the state does not have a ?nalised strategy with regard to which games will be offered outside the monopoly framework and how the licensing procedure will take place,” it said. Stamatis Draziotis, an equity analyst at Eurobank EFG, says the state’s reply was confusing. “We know that sports betting, which accounts for 60 to 65% of online product in Greece, [would be treated in that way]. Sportingbet has already paid tax in Greece for 2010-11. If the EC says it's okay to leave sports betting out of the licensing process, OPAP would be taxed but wouldn’t have any onshore competitors,” he says. “The regulated payouts of OPAP’s sportsbook would not be competitive – something like 85% – but offshore operators would offer 92-93%. Then we continue to have a massive offshore market and it will be very difficult to curb illegal gambling online.” Tender process In the same week the government con?rmed the sale of its stake, OPAP announced it had shortlisted three software ?rms – GTECH G2, Playtech and Intralot – as potential egaming joint venture partners when it launches an online offering this year. Discussions are at an advanced stage but, due to unclear regulations, these have been limited to scenario-based modelling of games, such as live casino, which have been mooted as likely inclusions in any future regulation. Last year, the Greek government also boosted OPAP’s earning potential by selling it the exclusive rights to operate all of its 35,000 video lottery terminals (VLTs) being launched in the country over the next 12 months. Ahead of privatisation these announcements will no doubt boost the value of the government’s stake. Indeed, a spokesman for OPAP said the current share price valuation of around €7 does not re?ect how its move into egaming will impact revenues, adding that the JV is designed to support a move into other regulated markets once it has established its Greek offering. “The sooner a potential buyer has clarity as to what is and isn’t allowed in Greece, the better the value will be. OPAP has huge potential when it becomes private to become less bureaucrat ic. Then it can really compete in the open world. We can be the leading gaming ?rm in Europe,” the OPAP spokesman added. Sources say the buyer will most likely be foreign with HRADV’s preference to ?nd a strategic buyer with experience in the gaming sector. The likely candidates are currently unknown, but large overseas operators, along with private equity and hedge funds that have already been involved in gambling, will almost certainly be front of the queue.
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he economic meltdown in Greece forced the government to part with a huge stake in another of its prized assets last month, announcing it is to sell off a 29% stake in gambling monopoly OPAP as part of a strategy to reduce a national debt of US$460bn. The stake up for sale – which has a current market value of around €700m but is expected to fetch at least €1bn – has been transferred to the Hellenic Republic Asset Development Fund (HRADV), the body responsible for selling Greek assets. And despite OPAP’s revenues plummeting 15.2% year-on-year in 2011 from €5.1bn to €4.4bn, the opportunity to buy into a regulated market worth almost €2bn across online and offline last year has attracted huge interest. OPAP, in which the state will retain a 5% stake, is the only gambling organisation allowed to offer sports betting and lottery products to Greek consumers. Prospective buyers will no doubt realise it is also wellplaced to bene?t from the passage of online gambling legislation, which took place in August 2011 (awaiting con?rmation from the Control Committee on what game licences will be given), having con?rmed plans to launch its egaming offering by the end of this year. Greece has a thriving but grey online gambling market worth over €250m a year, and the government was unsurprisingly keen to claw back some of the revenue ?nding its way to offshore sites. Since the egaming law was passed, however, private gambling ?rms wishing to continue operating in Greece have been left in the dark as to exactly which products will be regulated and crucially, what tax rates they will have to pay in future. In January the European Commission (EC), sensing a degree of protectionism of OPAP’s interests, called for further clari?cation.
€250m
Annual value of Greece's online gambling market Source: Eurobank EFG Equities 2011
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