French treat

Bloomberg business news is currently carrying an interesting feature on the potential of a liberated French gambling market for online gambling companies, opining that major online operators like Party Gaming, 888.com and William Hill could enjoy a boost next year when the French plan to open the market beyond its current monopolised status.
Legislation giving effect to the liberalisation comes before the French parliament next month on October 7th, giving entre to suitable foreign companies offering sports betting and poker, and ending the total domination of state monopolies such as Groupe Francaise des Jeux and Pari Mutuel Urbain.
Jim Ryan, CEO of Party Gaming plc, told Bloombergs: “The size of the population and the appetite for gambling, and the group’s historically cautious approach to France make this a particularly exciting opportunity for us.”
Sales from electronic gambling in France will more than double to Euro 671 million in 2010 when the new rules come into effect in the middle of next year, according to estimates from H2 Gambling Capital, a Manchester, England-based consulting company. In 2011, the market will be worth Euro 1.03 billion, an additional 53 percent increase.
Bloombergs recalls that U.K. gambling companies battled a recession-bedevilled economy this year which saw first-half net income fell by 26 percent to GBP 58.7 million at William Hill, the country’s second-largest online- gaming company, and by 57 percent to US$8.1 million at 888 Holdings.PartyGaming posted a net loss of US$66.9 million.
French revenues could help redress the situation.
“The U.K. is fairly flat if you like, or at least slowing down,” said Simon Holliday, director at the researcher H2. He added that France is “the largest single market on the horizon.”
The French move toward a more open market is partly to respond to increasing competition from online gambling firms and partly to placate the European Commission, which has pursued France for failing to allow free movement of goods and services between member nations when it comes to gambling.
Martin Higginson, CEO of the up-and-coming British interactive television gambling firm NetplayTV plc, told Bloombergs that the French market is “large and sophisticated,“ and will be as big as that in the UK as it becomes more open.
David Hood, a spokesman for William Hill plc, said the company is “very aware” of potential opportunities in France. “We would have ambitions to attract business from there,” he said.
Sigrid Ligne, secretary-general of the European Gaming and Betting Association, said the attractiveness of France to foreign operators will depend in part on tax rates and other rules.
France’s original proposal in March 2009 included a 7.5 percent tax on sports bets and a 2 percent tax on poker. Final tax levels will be set by parliament.
“The tax conditions that have been put in place by the French question how economically viable this is going to be for new market entrants,” Ligne said.
EGBA has also criticised proposed restrictions on the types of gambling and payouts that can be offered, which cause “huge concerns about how the project is going to allow fair access” to outside companies, Ligne said.
“The law does not protect monopoly activity,” a spokeswoman for the French budget ministry said in an e-mail. Existing gambling companies “will have to file an application for approval and conform to specifications. Only lottery, scratchcards, and games of random chance remain under monopoly” of Francaise des Jeux, she said.
The current monopolies are preparing fopr the new regime.  Patrick Germain, a spokesman for Francaise des Jeux said: “The competition will be strong” with new operators. The new law will create “the same taxation, the same rules on responsible gaming, the same rules on the struggle against corruption in sport, and permit Francaise des Jeux to compete equally,” he said.
Changes in the law may not benefit all foreign operators. Some foreign companies already do business with French gamblers, using offshore sites not subject to oversight or taxation in France, said Ivor Jones, an analyst at Evolution Securities Ltd. in London.
Such offshore revenue from French gamblers will be about Euro 346 million this year, declining to Euro 277 million by 2011 if the market is opened next year, researcher H2 estimates.
Whatever the specific regulatory regime adopted, France is “ripe for gambling, and it’s been sort of suppressed to an extent,” said Wyn Ellis, an analyst at Numis Securities Ltd. in London. “Any market that liberalises is central to everybody’s strategy.”

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