888 in South African B-to-B Deal

12 May 2009
Dragonfish, the business-to-business arm of 888 Holdings, has agreed to supply the South African operator Phumelela Gold Enterprises with an online sportsbook offering.

The deal sees 888 distribute Phumelela's horseracing pools and live-racing streaming via existing Dragonfish licensees and its dot-com Web site.

The agreement, which was announced Monday, also sees Phumelela take up 888's casino, bingo, poker and quickplay games once South Africa's expected regulatory regime is established.

Under existing national and provincial regulations, the only form of online gambling allowed in the country is sports betting.

Phumelela is a joint venture between Phumelela Gaming and Leisure Limited and Gold Circle Limited. Together, the companies operate 11 racecourses in South Africa, over 400 tote outlets and two betting Web sites.

The venture is managed by Phumelela. It owns the domestic and international broadcasting rights to South African horseracing. It also owns and operates Tellytrack, the country's horseracing TV channel.

The Phumelela deal provides further momentum for Dragonfish, which, on 888's first-quarter results, outperformed the company's core poker and casino businesses.

"A cornerstone of 888's growth strategy is expansion of its B2B offering and it is making good headway," James Hollins, an analyst with Daniel Stewart & Company, said in a note to clients Tuesday.

Richard Carter of Numis Securities, who, like Mr. Hollins, is bullish on 888, said in a note that "today's agreement with PGE (Phumelela) not only underpins current forecasts but has upgrade potential if successfully launched over the coming quarters."

With respect to London-listed firms, 888 follows Sportingbet in establishing a South African presence.

Sportingbet recently launched an online sportsbook in the country with licensure from Western Cape Province.

In the 2008 fiscal year, South Africa's gambling markets, combined, were valued at 15.6 billion South African rands ($1.8 billion) in gross gambling revenue, according to the country's National Gambling Board.

Gross gambling revenue from betting of all forms accounted for 14 percent of total revenue, or about $252 million.

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