Camelot gambles on Lottery experience

At just before 10am tomorrow, two phone calls will be made from the offices of the National Lottery Commission in Mayfair. There is little danger they’ll go unanswered.

At the other end, awaiting news of their fate, will be executives from Camelot, which has run the Lottery since its inception in 1994, and Sugal & Damani, a little-known New Delhi-based firm now vying to win the right to run Britain’s biggest-selling gaming product.

Since the two rivals tabled their bid documents back in February, they have been almost totally silent. As a contrast with the latter stages of the last licence contest in 2000, when Sir Richard Branson’s People’s Lottery consortium was denied in controversial circumstances, it could hardly be more stark.

„The competition has had as much tension as one of Camelot’s practice runs for the Lottery draw,“ said one insider.

That’s hardly surprising. Few people rate the Indian underdog’s chances as much better than those of the millions of punters who hope to scoop the twice-weekly jackpot.

By virtue of its 13-year tenure as the National Lottery’s operator, Camelot stands to gain from what analysts refer to as its „incumbency advantage“. This, say people involved in the application process, was a key factor in deterring interested parties, including Ladbrokes, the Greek company Intralot and Tattersall’s of Australia, from participating. Private equity groups including Apax Partners and Permira were also known to have been interested.

„It is very difficult for the regulator to switch the operator of a high-profile product such as the National Lottery, with all the risk that that entails, without a compelling reason,“ said another insider.

A 17-month transition between the current and succeeding licence period, which begins in February 2009 and will last 10 years, is intended to negate these concerns. Whether it actually does is another question. Camelot has been asked to raise a guaranteed GBP 2.2bn to fund the 2012 London Olympics, which poses another potential headache for the NLC if it decides to replace it.

If Sugal & Damani has one factor working in its favour, it may be its experience in the Indian market. Operated from an office at Chancery Lane in central London while preparing its bid, the firm has been running government-licensed lotteries in its home market for more than three decades.

Its lottery arm, which includes online games 2 Digits and Rajshree Trump, is part of a larger conglomerate that includes real estate, farm development, a jewellery showroom in Chennai, stockbroking, engineering and food shops in Mumbai.

With more than 20,000 computer-based lottery terminals across the states of Maharashtra, Punjab and West Bengal, it’s a substantial business, but while its lottery division is large by Indian standards, with an annual turnover of about USD 900m (GBP 450m), it is dwarfed by Camelot’s GBP 4.9bn in ticket sales for the year to March 31.

That figure marks a decline from the National Lottery’s peak in the late 1990s, when Camelot notched up GBP 5.5bn in annual sales. Executives point, however, to the fact that turnover in 2006-07 was higher than in three of the previous four years.

Camelot’s chief executive, Dianne Thompson, looks to have pulled together an impressive application. Alongside headline-grabbing proposals for a world lottery draw, and partnerships with companies including BSkyB, eBay and Orange, designed to reflect consumers‘ growing demand for multi-platform gaming services, the Camelot bid also contains pledges to reduce costs, replace its 26,300 lottery terminals and increase their number to 27,600, and generate higher returns for good causes.

By comparison, Sugal & Damani has publicly declared little of the content of its British bid. Suggestions that it had signed up Cable & Wireless as a partner were roundly denied by the telecoms firm. In India, it owns much of the technology it uses, including a proprietary software system called Complott, while its external technology partners include IBM, LG, the Korean consumer electronics group, and Wipro, the Indian IT services firm.

The Daily Telegraph has learned that Sugal & Damani held discussions with Ogilvy & Mather, the advertising agency owned by Sir Martin Sorrell’s WPP Group, although it is unclear whether these talks led to a formal agreement to work together. On the financing side, the Indian firm has recruited Deutsche Bank to underwrite its bid.

Kamlesh Vijay, the Sugal & Damani executive responsible for the firm’s UK lottery bid, declined repeated requests to comment on the firm’s strategy, partners and plans. While it believes it is capable of taking on the UK lottery, privately the Indian company is said to accept that it’s a long shot.

Those who know Thompson well say she is not the complacent type, but when that phone call arrives tomorrow morning, she is certain to answer it more in expectation than in hope.