Tabcorp’s rivals cry foul over customer data rights in Victorian betting licence process

Doubts are emerging about the state government’s ability to create a competitive bidding process, with Tabcorp claiming ownership of customer data.

There are may be issues about funding for Victorian racing under the next betting licence in the state

Tabcorp is in the box seat to retain its exclusive Victorian wagering licence, potentially at a company-friendly price, as doubts emerge about the bidding process due to question marks about customer data ownership.

The Victorian state government has received preliminary interest from Tabcorp and other potential bidders for the licence, including the likes of Sportsbet, Entain and Betr, but are increasingly concerned about accessing information about customers.

Without access to a customer database – which Tabcorp claim it owns – then Tabcorp’s rivals are increasingly unlikely to join in a competitive bidding process to take over the licence from Tabcorp for hundreds of millions of dollars, only to have to build a Victorian retail business from scratch.

Meanwhile, the Victorian racing industry is increasingly worried that a low Tabcorp offer would have dire implications for the funding it receives from its joint venture with the licence holder (Tabcorp has held the licence since 1994).

Tabcorp could be looking to pay about $500m for the next exclusive rights, which authorities consider to be insufficient given the joint venture been Tabcorp and Victorian racing generates earnings before interest and tax, depreciation and amortisation of $220m-$250m – which some estimate gives it intrinsic value of $1.5bn-$2bn.

Tabcorp and Victoria are in a joint venture that expires in August next year, for which Tabcorp paid an upfront $410m in 2011 for the right to exclusively operate retail betting outlets and TABs in pubs and clubs.

The Victorian government had hoped for plenty of competition from Tabcorp’s competitors for the licence, with most wagering firms having already at least submitted expressions of interest to the bidding process.

But Tabcorp’s competitors are understood to be up in arms about the data issues. They have told government and racing authorities that without any access to customer information that stem from the current joint venture – potentially such as the customers who sign up to bet online at Tabcorp venues – they see little point in bidding for the asset.

The dispute about interpreting the current joint venture contact and data ownership could lead to legal action should it hinder the already delayed bidding process. Binding submissions for the licence are imminent, though also overdue considering Tabcorp’s current deal expires in August 2024.

Tabcorp chief executive Adam Rytenskild, who has been vocal about his company’s need to focus more on its digital assets around the country, has also indicated he would not bid huge amounts for the Victorian licence. Tabcorp claim the existing licence is already its least profitable compared to deals it has struck in other states.

A lack of competitive tension for the licence could in turn put pressure on funding to Victorian racing, which is locked in a bitter battle with counterparts in NSW for public and wagering attention on their biggest race days of the year.

Tabcorp would not comment. The Victorian government was approached for comment. Racing Victoria chairman Brian Kruger told Melbourne radio this week that the “longer [the bidding process] goes on and the longer we don’t have [funding] certainty, it will make investment decisions challenging for us.”

There are also doubts about the timing of the process, given the existing licence expires in August 2024. The Victorian Gambling and Casino Control Commission only advertised for a project manager role for the process last week. Applications close on February 20.

In a note to clients in December, Credit Suisse Larry Gandler said he “expected there to be very few interested parties in the [Victorian] licence.”

He said he expected Tabcorp to pay about $500m for the deal and that he believed a point of consumption tax of 20 per cent for all betting companies would later be applied.

“Entain would be the only realistic other bidder; but strategically it makes sense for Entain to allow Tabcorp to acquire [The Victorian] licence and then contemplate Tabcorp as an acquisition target thereafter,” Mr Gandler wrote.

Tabcorp had last July confidentially proposed a three-decade extension to its exclusive Victorian agreement, and a “positive obligation” from the government to “have the licence remain competitive”.