Pre-Olympic Gaming Records

8 August 2002

The recent movement to prohibit all forms of electronic games in Greece could slam the door on Internet gambling there, but a few established Greek companies with I-gaming products are thriving nonetheless, and their success will play an important role in funding the next Summer Olympics.

In 2004, the Olympics Games will be hosted by Athens, the capital of Greece. All kind of new records will be broken during this mother of all sporting events. This happens at every modern Olympic Games, so it's nothing new. What's new is that Greece, or as it is officially known, the Hellenic Republic, is already breaking pre-Olympic gaming records.

Intralot, a Greek company that provides gaming products and services worldwide, has been ranked among the best 100 European stocks. Its shares have outperformed the Greek General Index by 35 percent in 2002.

Above that, three weeks ago the Hellenic government generated Euro 508.7 million from the sale of an 18.9 percent stake in state-owned lottery and soccer pool company OPAP.

A Closer Look at Intralot

Intralot is an affiliate of the Greece-based Intracom Group. Founded in 1977, Intracom is the largest manufacturer of telecommunication equipment and information systems in Greece. In 1990, the company was listed on the Athens Stock Exchange (Reuters: INRr.AT ). Now it's the largest manufacturing integrator of telecommunications and IT products and networks in southeast Europe. Other offerings include energy management systems and defense and satellite applications.

Intracom has a presence in more than 50 countries worldwide. The Intracom Group, including its affiliates and subsidiaries, employed 7,700 people during the fiscal year 2001, with a total turnover exceeding Euro 1.4 billion and Euro 250 million in profits before tax. Group exports rose to Euro 310 million in 2001 and are expected to rise to Euro 430 million in 2002.

On May 15, 2002, Intracom S.A, announced the acquisition of 41 percent of Siemens Tele Industrie S.A. from Siemens Information and Communication Networks (IC Networks). Siemens Tele Industrie S.A. is now jointly owned by Intracom and Siemens with a 41 percent each; the National Bank of Greece holds 18 percent.

Established in 1992, Intralot S.A. is an information technology company specializing in the gaming equipment and gaming services. The company focuses on the development of integrated lottery systems, the design and development of lottery games and providing operational and support services. Listed on the Athens Stock Exchange since November 1999, the company has a high market capitalization. Its consolidated turnover for the year 2001 reached Euro 282 million compared to Euro 242.1 million for the same period in 2000. Profits before taxes recorded an increase of 50 percent by reaching Euro 62.3 million compared to Euro 41.5 million in 2001.

On May 14, 2002, Intralot announced consolidated interim results for the first quarter ended March 31, 2002. Revenues reached Euro 76.3 million compared to Euro 63 million in the same period last year, a 21 percent increase compared to the previous period. EBITDA (earnings before interest, tax, depreciation and amortization) increased by 29 percent to Euro 22.5 million, compared to the same period last year.

Intralot’s Key Stock Data

No. of shares: 37.082.000
Market Cap: GRD 246,409.89 billion GRD, Euro 723.1 million
Listing: Athens Stock Exchange
Index Participation: TSE-40, IT Companies
Symbol: INLr.AT

Intralot is ranked as the best performing stock of the Greek Stock Exchange (between those included in the FTSE All Europe Index) as well as within the top 100 European stocks that demonstrated the best performance for the period between March 2001 and March 2002, according to a Financial Times survey released July 2, 2002. This survey is produced in conjunction with the FTSE, the global equity index provider, and is carried out every year, measuring total shareholder return. Intralot’s shares increased 19.4 percent during this period, while at the same time, the Greek stock market declined significantly. It’s also worth mentioning that since March 2002, Intralot has increased another 10 percent versus a 2 percent fall in the Greek market, continuing to incorporate the good news, the first quarter rise in sales and earnings, as well as the high dividend policy that again was followed by the company for the fiscal year 2001.

For Intralot, it is very important that they are operators as well as system developers. This gives them valuable insight in the real-life concerns faced by a lottery organization. As the operator of a national lottery, audited by the government and remunerated through a percentage of revenues, Intralot has first-hand experience of the difficulties confronting a lottery operator. Intralot has faced issues and derived solutions to problems beyond the usual domain of a lottery supplier.

Intralot holds a dominant position in Greece as well as the Balkan and eastern European markets, while maintaining a strong presence in Africa, the Middle East, Asia and South America. To facilitate project implementation, Intralot has established a large number of subsidiaries in Greece and abroad specializing in organizational, operational and support services for the systems installed by the Company.

Additionally, Intralot works with companies organizing lottery games under license by the competent civil authorities--in Greece and abroad--transferring its know-how in information systems, organization, operation, promotion and support of lottery games. The Intralot Group has a total work force of 400 employees.

Share Holders

Greece: Betting Company S.A., Instant Lottery S.A.
Romania: Lotrom, Intrarom
Yugoslavia: Yugolot
Bulgaria: Bilot, Eurofootball
Cyprus: Intralot International
Ukraine: Nika
Moldavia: Loteria Moldovei
Chile: Intralot de Chile
Peru: Intralot de Peru
Uruguay: Markil

Clients

Greece: OPAP S.A (Greek Organization of Football Prognostics), ODIE S.A. (Horseracing Organisation of Greece), Instant Lottery S.A., Betting Company S.A.
Cyprus: OPAP of Cyprus
Romania: Loteria Nationala (CNLR)
Yugoslavia: Lottery of Belgrade
Bulgaria: BST (Bulgarian Sports Totalizator), Eurofootball
Moldova: Loteria Moldovei
Chile: Polla Chilena
Peru: Beneficencia Publica de Jaen

Now Intralot is looking for expansion in the North American market. On April 26, 2002, the company stated, ”The penetration into the North American gaming market through the establishment of its subsidiary, Intralot Inc., was announced last week during the annual general meeting of the company. Intralot Inc is based outside of Atlanta in Duluth, Georgia and it will operate as Intralot USA .“

Intralot USA has hired the expertise of president and CEO Thomas F. Little, a 25-year veteran of the lottery industry. A graduate of Purdue University, Little is the former senior vice president of Scientific Games, and has participated in more than 100 lottery start-ups and operations. VP Wilson K. Cunningham brings 20 years of lottery experience as an executive, most notably with Scientific Games and GTECH. A graduate of the Georgia Institute of Technology, Cunningham was responsible for the development of the design and implementation of lottery systems for more than 21 states and five countries. The chairman of Intralot, Socrates Kokkalis, emphasized that, “Intralot, with 20 subsidiaries and four representative offices, is a multinational company that can serve its clients in five continents. This diversification will give us excellent potential for future growth.”

The CEO of Intralot, Constantinos Antonopoulos, said the pre-tax profits of the company for 2002 are expected to show an increase of more than 20 percent compared to 2001 and the consolidated turnover is expected to grow by 15 percent compared to 2001.

The continuous improvement of profitability and cash position gives Intralot the ability to maintain a high dividend yield. The annual general meeting approved a Euro 0.65 dividend per share, which is an increase of 124 percent compared to the previous year--a real gaming record!

Intralot's Online System

Intralot has a wide product line, covering traditional lottery games, sports betting, instant lottery games and video lottery games, as well as an online lottery system including a series of in-house or third party lottery terminals connected through a wide spectrum of networks to the central system. All the applications utilize Internet technology enabling end users to participate in lottery games through PCs, WAP, mobile phones and PDAs. The quality accreditation of Intralot has been certified by ABS Quality Evaluations Inc. for being compliant with the requirements set forth by ISO 9001: 1994. The granted certification is applicable to design, implementation, testing, installation, maintenance, integration and operation of IT systems.

The Lotos Cyber-Betting platform uses technology that supports secured betting transactions over the Internet. Integrated with Lotos core components, Lotos Cyber-Betting offers a unique and complete gaming framework that can be adapted to all known sales channels. Intralot’s Cyber-Betting Platform is capable of supporting game play over alternative channels for the games that are available through the traditional sales channel. Its multi-tier architecture is based on the main core component of the lottery system. The platform provides channel integration, supported games, customer accounts, cyber account features, electronic payments, administration, security and activity monitoring.

OPAP (Greek Organization of Football Prognostics, www.opap.gr)

The aim of the creation of OPAP is provide financial support to Greek sports and culture. The organization covers the whole Greek territory and has also a department in Cyprus. It has the exclusive right to operate as a bookmaker.

Only authorized lotteries by special law will be legal and controlled by the state through regulations in such a way that lottery players will be secured from the risks as occur by the exploitation of unauthorized lotteries.

OPAP is a legal entity under private laws subject to the administrative supervision of the Ministry of Culture and, more in particular, the Sports Secretariat. In 2001, OPAP became a Société Anonyme and was listed on the Athens Stock Exchange as OPAr.AT. The Greek state had originally offered 10 percent of the state-held organization, but scaled down plans after the issue was under-subscribed. It instead sold about 5 percent, or 16,038,310 shares, at Euro 5.50 each.

OPAP announced it expects revenues and EBT up 24 percent and 8.3 percent respectively for the full year 2001. According to OPAP, revenues for 2001 were Euro 1.8 billion relative to Euro 1.45 billion in the same period last year. The earnings before taxes reached Euro 353 million from Eur 326 million in 2000. The news is positive for the state owned gaming company, since the government has to invest extensively in the realization of the Olympics.

OPAP is a very successful lottery using Intralot's lottery system. Five thousand seven hundred online terminals are currently operating in almost 5,000 retail outlets all over the country. The system was selected by OPAP and has been operational since December 1990. It supports three regional Data collection centers (located in Athens, Salonica and Cyprus) and one National Processing Center (located in Athens).

The Lotto game has become very popular among the Greek players. In the first year of operations, it reached an average of 80-85 million columns per week. The impressive popularity of the Lotto game brought around the need of expanding the system's network by installing more terminals and introducing Proto, a lottery game based on numbers randomly generated by the terminals and printed on the lotto coupons.

OPAP's products include Pro-Po Super 13, Lotto, Pro-Po Goal, Proto and Joker.

Betting Company A.S.

Intralot signed a contract with OPAP in 1999 for the implementation and operation of fixed-odds betting (Pame Stihima) in Greece. The project started its commercial operation in January 2000, introducing the "Long List Betting" game with football and basketball matches from almost all European Leagues.

The organization and the risk management of the new game have been awarded by OPAP to Intralot and its subsidiary Betting Company S.A. for seven years with an extension of three years on a percentage of sales base. It is worth mentioning that Intralot and Betting Company are cooperating with Ladbrokes U.K. for the odds compilation and other services.

Intralot's betting system supports other types of betting games as well, such as ante post, first winner, half-time/full-time results, exact score estimates, first scorer, etc., which were introduced in the Greek market in June 2000 with the occasion of Euro 2000 football matches. There is an installed base of more than 5,500 online betting terminals in Greece, having online/real-time connection to a central computer center, running Intralot’s Betting Information and Operation Support (BIOS) system. Bet coupons are scanned in the lottery terminals, and bet data is transferred and stored in the central system in real time, for further processing and accounting.

Intralot claims to be the largest online bookmaker in the world; its annual sales for the betting games reached Euro 1 billion in 2000. In 2001 the turnover was close to Euro 1.4 billion. In 2000, the OPAP games had a share of 38 percent of the total Greek gambling market (source: P&K Research).

The Hellenic government has to decide to sell shares of OPAP to generate extra funds for the organisation of the Olympic Games in 2004--first 5 percent and last week there was secondary offering. Greece sold 60.3 million existing shares in OPAP in a public offering to Greek and foreign investors at Euro 8.44 per share, raising Euro 508.7 million--another pre-Olympic gaming record.

Above that, the Greece business news paper, Kathimerini, reported July 30, 2002 that the Hellenic government will issue, next month, an international tender for the country’s instant lottery, Xysto. The contract will come into effect in August 2003, after the expiry of the agreement with the current operator, Intralot, which had been renewed once before. The terms will include a Euro 30 million letter of guarantee for participation in the tender, a 100-fold (another new record!) increase in the letter of guarantee for the operation to Euro 50 million and a rise in the minimum annual amount of royalties to the government from Euro 30 million to Euro 50 million or 32.5 percent of gross revenue, whichever is higher--More gaming money that the Greece government will need to organize the 2004 Games in Greece.




Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.