Big business grabs for the winning ticket: Jason Nisse assesses the chances of the bidders for the National Lottery

Click to follow
The Independent Online
POTENTIALLY it could be one of the greatest money spinners to emerge in British business since the late Lord Thomson described ITV franchises as 'a licence to print money'.

The National Lottery was promoted as a way of raising pounds 1bn a year for charitable beneficiaries, particularly in the areas of sports and the arts. But as many of the largest companies in the UK fight it out for the right to run the lottery, the bidders (with a few honourable exceptions) increasingly seem to be viewing the seven-year franchise to run the lottery as a way to bolster their own profits.

Eight bidders have already emerged, yet we are still four weeks from the official closing date for declarations of interest to the Department of National Heritage - 14 February.

The winner of the battle will be decided in May or June.

Two of those bidders - Richard Branson's UK Lottery Foundation and the Rainbow consortium that is backed by advertising agency Leo Burnett - have committed themselves to giving the profits they make from the lottery to charity.

The others are likely to take up to 15 per cent of the total amount bet to pay for running the lottery. Estimates of how much will be bet tend to fall in the area of pounds 4bn annually in today's money - so there will be pounds 600m a year going to the lottery operator, producing as much as pounds 100m of profit.

This is to be split a number of ways. There will be the technology - terminals going into 20,000 newsagents, post offices and other shops around the country plus the telecommunications links with these outlets - the printing, the money transfer, the administration and the marketing. In addition there will be the fight to make the lottery programme - a half-hour show each week when the draw is made. In many countries with lotteries - notably Ireland and Spain - this programme commands some of the highest ratings on TV.

With all this income available, it is not surprising that a great deal has been spent. Both The Great British Lottery and Camelot are understood to have 50 people working on their bids. Their costs are probably pushing pounds 20m each so far. Other bidders such as Rank Organisation, Games for Good Causes and NM Rothschild, have been working on the project for months. An army of consultants, lawyers and merchant bankers is fluttering around the bidding process.

For veterans of the battle for the ITV franchises a couple of years ago, there is a terrilbe sense of deja vu. Then fortunes were spent on bids with many unhappy losers, and the result was a debacle. Peter Davis, the former banker who has been appointed director-general of the Lottery, will be hoping to make a better fist of it.

THE FORM ON THE PLAYERS

HERE are the lottery contenders, with betting odds provided by our panel of experts.

The Great British Lottery Company (Granada, Hambros, Vodafone, Associated Newspapers, Carlton)

A strong contender, well funded, well backed and, thanks to a development contract with US group Automated Wagering International, technically adept.

Its operation, based near Heathrow airport, is impressive but suffers on two counts - the problems of working within a consortium where different partners have different objectives, and that fact that Gerry Robinson, the chairman, has been distracted by the bid for LWT by Granada, where he is chief executive.

Odds on winning: 5/1

Camelot (Cadbury Schweppes, ICL, Racal, De La Rue, GTech)

As well-funded, as impressive and technically even more advanced than Great British Lottery, this group exudes confidence but it has problems, mainly thanks to its shareholders. There is a question mark over the US partner GTech, which has faced criticism over how it won lottery contracts in the US, though it denies any impropriety. The involvement of Dominic Cadbury's company has also led to concerns that selling confectionery may take precedence over selling lottery tickets. It had a big launch but appears to have slipped since then.

Odds on winning: 10/1

GEC/Thorn EMI/The Tote

This group is probably the dark horse in the race. Like Rank, it is has been reticent about its preparations. The participants have no real experience in the area, but the group is high on technological ability and distribution skills. In addition, GEC's and Lord Weinstock's history of influence in government circles means that its chances should never be discounted.

Odds on winning: 11/2

Games for Good Causes (MAI, Ladbroke, Kleinworts, AT&T)

Has emerged as a favourite since declaring its hand last week. Lord Hollick of MAI and Sir Christopher Benson of Kleinwort Benson may be the figureheads, but the consortium is Ladbroke's show and its strengths and drawbacks come through its involvement. Ladbroke's Vernons pools operation has market experience and has been developing the concept for at least a year. But Ladbroke has been attacked for conflict of interest and the mud is sticking. If (and this is a big 'if') OffLot decides that it is OK for Ladbroke to own betting shops, a pools company and a stake in the lottery, it looks like the strongest contender.

Odds: 9/2 favourite

Rainbow (Leo Burnett plus a collection of well-known business names.)

The other not-for-profit bid. This one is not only light on finance, it is not clear what expertise it has beyond the obvious publicity skills of the Leo Burnett advertising agency. Even the involvement of luminaries such as Sir Patrick Sheehy, the head of BAT, and lawyer Denise Kingsmill, do not add sufficient weight. A rank outsider.

Odds on winning: 100/1

UK Lottery Foundation (Richard Branson, Lord Young)

One of the two not-for-profit bids and by far the stronger. Like any Branson venture it has a great deal of publicity and goodwill behind it, plus an impressive list of the great and good who are willing to lend their names, including Lord Young of Graffham, head of Cable & Wireless.

There is a reasonable management team, headed by John Fitzpatrick, who launched the Irish lottery, but the group's lack of financial muscle could be its achilles' heel.

Odds on winning: 8/1

Rank Organisation

This group, led by Michael Gifford, is bidding with the backing of a number of City institutions. Though it has not fully declared its hand, it is understood to have been working on the project for the best part of a year and boasts the involvement of senior executives from the Ontario Lottery and from Andersen Consulting, which advises one in three of the lotteries in the United States. The group could be one to watch.

Odds on winning: 13/2

NM Rothschild/Tattersalls

Another strong grouping and one of only two with actual experience running a lottery, as Tattersall is the operator in many Australian states. The team, led by Anthony Fry of Rothschild, argues that the owner of the equity should be separate from the operator. If OffLot swallows this, it is a leading contender. Otherwise it faces an uphill battle.

Odds on winning: 6/1

(Photographs omitted)

Comments