Lotterylooks to go online

CAMELOT, the National Lottery operator, is set to acquire an internet gambling business in its ongoing attempts to broaden the game's appeal., the Ofex-listed bookmaker, is thought to be among the operations being looked at by Camelot. The consortium, which consists of Cadbury Schweppes, De La Rue, ICL and Racal, is eager to tap into the recent boom in internet betting.

It is part of Camelot's eagerness to find new outlets for its products as the race to be the next lottery operator hots up. Camelot is under pressure from the National Lottery Commission, its regulator, to increase its sales to ensure that its charitable donations are maintained.

Concern that the lottery is losing its appeal was highlighted last week when Camelot announced a 40 per cent fall in profits for the first half of this year from pounds 34m to pounds 20.2m. Camelot's contributions to charity for the period fell from pounds 696.3m to pounds 633.5m.

Much of the fall was blamed on the decline in popularity of Instants, its scratch cards game. Camelot has already acted to offset this shortfall with the introduction of the Thunderball weekly draw and the launch of Big Draw 2000, its one-off lottery for millennium weekend.

Critics argue that the new draws and the planned internet investment are motivated by Camelot's eagerness to head off accusations of profiteering by reducing its bottom line until the new licence is awarded.

Although Littlewoods, a widely mooted bidder, has dropped out, Richard Branson's Virgin Group is likely to provide stiff competition to Camelot's hopes of retaining the licence. Virgin is looking for support for its bid from AWI and Essnet, the two lottery equipment providers which are the main rivals of GTech, whose technology is used by Camelot. However, Virgin has yet to make a final decision.

Virgin is thought to be unhappy with the conditions of the licence renewal announced by the National Lottery Commission. Rival bidders are understood to be concerned that the handover period, should Camelot lose, is too short to allow them to make a smooth start. As well as Littlewoods, several other anticipated bidders have failed to come forward - notably Rank and Ladbroke, the hotel and bookmaking group. Camelot chairman Sir George Russell has formed an alliance with the Post Office to boost its latest bid.

Camelot's donations to charity are on track to exceed the pounds 9bn demanded by the time its seven-year contract runs out.

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