Betting on Big Returns

The Greek state became richer by $1.546 billion in July from the successful sale of a 16.44 percent stake in OPAP, the country’s biggest and most successful gaming organization.

That sum represents the highest amount ever earned from a single placement of shares of an enterprise formerly owned by the state.

Local and international investors were extremely keen to acquire an interest – or further interests – in one of the most profitable companies listed on the Athens Stock Exchange.

Their enthusiasm is understandable. The value of OPAP shares rose strongly following the successful sale and the company’s dividend policy is regarded as generous. It holds the sole concession to operate and manage eight existing numerical lottery and sports betting games as well as three new numerical competitions. “The dividends that OPAP has been paying through its earnings amount, approximately, to between 93 percent and 99 percent of the total net profits of each period,” says Basile Neiadas, the company’s chief executive officer.

Demand for shares in July was so great, he says, that on the first day of the offering there were 64 million share demands from the foreign market. The response of the Greek market was just as impressive. Non-institutional investors made more than 60,000 requests – an all-time record for the Greek stock market. In the end, the sale of 52.45 million shares was nearly four times oversubscribed.

Basile Neiadas, CEO, OPAP

Says Neiadas: “Usually the mass of demand comes on the third day of an offering and usually during the last hours of the day.”

Part of the appeal of the offering for investors, he says, was that as a result of new government legislation, tax liability on shares is being reduced from 35 percent initially to 29 percent and eventually to 25 percent.

Neiadas says these savings will be passed on to investors.

Even if there is no significant increase in the sales of the company’s games, the lowering of the tax bracket means that investors will benefit significantly.

OPAP commands 49 percent of the total Greek gaming market, which includes casinos, national lotteries and horse-race betting. Its games are sold through a distribution network of more than 5,300 agents, the country’s largest online retail network.

This latest round in the OPAP privatization represents 80 percent of the Greek government’s financial returns this year from the process of turning state-run enterprises over to the private sector. Its success is sending an encouraging message to investors casting their eyes on the Athens Stock Exchange and the performance of the Greek economy under its center-right government.

“OPAP has contributed a lot by being very professional and by making a very intense presentation through its road show, to all the most important institutional investors in the U.S. and Europe,” says Neiadas. “Investors have seen a serious company – one with a vision for the future.

“Seeing OPAP in the headlines every day, trading numbers and price increases, has boosted the whole stock market.”

Shares in OPAP were first listed on the Athens exchange in April 2001 when the Greek state, under its previous socialist government, offered a 5.3 percent portion of the company for sale at €5.5 per share. Two more tranches followed. In July 2002, 18.9 percent was offered at €8.4 per share and a year later 24.5 percent was offered at €9.44. The government has reduced its holding to 34 percent.

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Olympian leader’s optimism

Basile Neiadas, OPAP’s chief executive, has a philosophical attitude on the prospect of what will happen when the company eventually loses its monopoly status.

“This will not be a threat. It will be an opportunity,” he says.

“We respect the decision of the Minister of Sports to keep gambling out of the free flow of services in the European Union. But it means that we are limited to Greece’s population of 11 million people. If we lose the monopoly we will have a target of 350 million in the European Union.”

Neiadas has a business background in the pharmaceutical and cosmetic industries, and before taking charge of OPAP he distinguished himself as the general director of support services for the Olympic Games in Athens.

“I don’t see why OPAP – one of the oldest lotteries in Europe and one of the most experienced with beautifully designed games, with lots of profits and lots of cash – couldn’t be a significant player in this bigger market.”

He now casts covetous eyes even farther afield.

“Right now we are unable to reach more than 20 million Greeks who live outside of Greece. Imagine if we could have the possibility of offering games like Propos and Jame Stihima to the Greeks living in Australia, to those living in the U.S. and to those in Europe.”

At present, reaching those expatriate Greeks is not a practical proposition for the company. However it has a subsidiary company, OPAP International, which is carefully studying the gaming markets worldwide.

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Sporting Chances Multiply

Greeks love to play games. So OPAP is busy devising new and improved ones that can be made available in airport terminals, cruise ships, expressway eateries and even via live entertainment programs on terrestrial television.

 Betting on sporting contests while they are broadcast live on television is about to be introduced and so is betting on new sports including motor racing, tennis, volleyball and water polo. And, for the first time, it will be possible to place bets on Greek soccer teams in combination with other European clubs.

Basile Neiadas, chief executive of OPAP, argues that in addition to boosting the company’s profits, these new methods of enabling people to bet legally are the best ways to combat illegal gambling.

“It protects players, ensures that they receive their winnings on time and provides them with a certificate of tax compliancy to satisfy the fiscal authorities,” he says. “These are all great advantages not available to people gambling illegally.”

OPAP holds a 20-year concession with exclusive rights to operate sports and numerical betting games and the right of first refusal for all new lotteries introduced.

Its three most popular games are:

• Jame Stihima, the company’s largest sports betting game, in which participants bet on the results of soccer or basketball games or tennis matches.

• KINO, a newly introduced fixed-odds numerical game where players visit OPAP agencies, choose numbers and win if those numbers appear on an electronic monitor, with new draws taking place every 15 minutes.

• Propos, a traditional game, in which participants predict the results of a list of soccer games.

 OPAP has announced several measures to enhance interest in Stihima and improve its profitability. Payouts will increase from 60 percent of the stake to 66 percent. The inclusion of Greek soccer matches in the national league in combination with foreign championship matches is expected to be extremely popular. And participants will, for the first time, be able to lay bets while the games are being played.

“Being able to wager on a game while it is in progress and broadcast live on television is a very exciting way of betting,” says Neiadas.

He believes that within a year or so it will be possible for people to play KINO in cruise ships and ferries plying the Aegean, Ionian and Mediterranean Seas.

“Every year,” he says, “there are 13 million tourists, especially in the summer, who may be delighted to play KINO during their journey to the islands.” He also envisions the game being available to airline passengers waiting for their planes, “and possibly for people resting in highway cafes and restaurants.”

  But these developments, Neiadas says, will have to wait for the introduction of a new IT system that will increase capacity and enable the use of many terminals.

Televised Bingo will be staged during a live show with entertainment and other competitions targeted at family audiences. It will be broadcast on a weekday, when there are no soccer matches, and late in the evening after the KINO games have ended.

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