Several groups which applied for the original licence in 1994 are not expected to bid, including Ladbroke, which teamed up with MAI five years ago, and Rank. Speculation that media groups United News & Media and Carlton would join forces has also been quashed.
Richard Branson is unlikely to front another bid for the Lottery but could become involved with another bidder. Camelot, a consortium comprising Cadbury Schweppes, De La Rue, ICL, Racal and G-Tech - which has since pulled out - won the licence in 1994 against seven other bidders, but this time the field is expected to be much smaller.
A spokeswoman for the Post Office said: "We are the UK's largest National Lottery retailer and we have a keen interest in the future of it and its success. It is something we are looking at, although we have not made any definite decision to bid."
Sources close to Littlewoods said the privately owned retail and betting group has been looking at the Lottery for over a year. It is understood that Littlewoods believes it can offer more to good causes than the pounds 10bn donated by Camelot.
In addition, Littlewoods may use its gambling expertise to offer a wider range of games than Camelot. Littlewoods would be eager to bid to make up for the impact the Lottery has had on its football pools business, whose turnover has more than halved since 1994.
The Post Office may bid to further its strategy to move to a more commercial footing, which has seen it make two overseas acquisitions this year.
Littlewoods and the Post Office have been heartened by the Government's stated desire to see the Lottery run on a non-profit basis. Camelot, whose members have shared profits of pounds 181m since its formation, claims to run the world's most efficient lottery, but rivals have been critical of its performance. Camelot's public image was undermined by a libel case involving Guy Snowden, then head of G-Tech, and Richard Branson, the founder of Virgin.
Camelot's annual results, expected next month, are expected to show that the National Lottery's revenue has fallen from pounds 5.5bn to pounds 5bn.
A Camelot spokeswoman said: "It is too early to decide but we would hope to bid."
However, all the potential bidders are likely to delay a final decision until July, when the National Lottery Commission, the regulator made up of five members, is due to reveal its statements of principle.
The commission, which replaced Oflot, last week invited interested parties for their views on the selection process. Rival bidders are concerned that Camelot, which has run the Lottery since its inception in 1996, has an unfair advantage because it already has its own equipment in place. A new Lottery operator would have to include the cost of new equipment in its calculations.
There is also pressure to force Camelot to co-operate with an incoming bidder on 30 September 2001, when its licence expires. One insider said: "When Camelot's time is up, they can just switch off their systems and walk away. There can't be a gap between Camelot giving up and a new licence- holder starting."
Littlewoods would be likely to team up with an equipment provider, just as Camelot enlisted the help of G-Tech, the American lottery specialist.Reuse content